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PETROLEUM (AUSTRALIA-INDONESIA ZONE OF COOPERATION) ACT 1990 No. 36, 1990 - SCHEDULE
SCHEDULE Section 5
TREATY BETWEEN AUSTRALIA
AND THE REPUBLIC OF INDONESIA
ON THE ZONE OF COOPERATION IN AN AREA BETWEEN
THE INDONESIAN PROVINCE OF EAST TIMOR
AND NORTHERN AUSTRALIA AUSTRALIA and THE REPUBLIC OF INDONESIA
TAKING INTO ACCOUNT the United Nations Convention on the Law of the Sea done
at Montego Bay on 10 December 1982 and, in particular, Article 83 which
requires States with opposite coasts, in a spirit of understanding and
cooperation, to make every effort to enter into provisional arrangements of a
practical nature which do not jeopardize or hamper the reaching of final
agreement on the delimitation of the continental shelf;
DESIRING to enable the exploration for and exploitation of the petroleum
resources of the continental shelf of the area between the Indonesian Province
of East Timor and northern Australia yet to be the subject of permanent
continental shelf delimitation between the Contracting States;
CONSCIOUS of the need to encourage and promote development of the petroleum
resources of the area;
DESIRING that exploration for and exploitation of these resources proceed
without delay;
AFFIRMING existing agreements on the delimitation of the continental shelf
between their two countries;
DETERMINED to cooperate further for the mutual benefit of their peoples in the
development of the resources of the area of the continental shelf yet to be
the subject of permanent continental shelf delimitation between their two
countries;
FULLY COMMITTED to maintaining, renewing and further strengthening the mutual
respect, friendship and cooperation between their two countries through
existing agreements and arrangements, as well as their policies of promoting
constructive neighbourly cooperation;
MINDFUL of the interests which their countries share as immediate neighbours,
and in a spirit of cooperation, friendship and goodwill;
CONVINCED that this Treaty will contribute to the strengthening of the
relations between their two countries; and
BELIEVING that the establishment of joint arrangements to permit the
exploration for and exploitation of petroleum resources in the area will
further augment the range of contact and cooperation between the Governments
of the two countries and benefit the development of contacts between their
peoples; HAVE AGREED as follows:
PART I
ZONE OF COOPERATION
Article 1
Definitions 1. For the purposes of this Treaty,
(a) "contract" or "production sharing contract" means a contract between
the Joint Authority and corporations, concluded on the basis of the
Model Production Sharing Contract, entered into under Article 8 of
this Treaty and in accordance with Part III of the Petroleum Mining
Code;
(b) "contract area" means the area constituted by the blocks specified in
the contract that have not been relinquished or surrendered;
(c) "contractor" means a corporation or corporations which enter into a
contract with the Joint Authority and which is registered as a
contractor under Article 38 of the Petroleum Mining Code;
(d) "Contractors' Income Tax" means tax imposed by the Indonesian Laws No.
7 of 1983 on Income Tax and No. 6 of 1983 on General Tax Provisions
and Procedures as amended from time to time;
(e) "criminal law" means any law in force in the Contracting States,
whether substantive or procedural, that makes provision for or in
relation to offences or for or in relation to the investigation or
prosecution of offences or the punishment of offenders, including the
carrying out of a penalty imposed by a court. For this purpose
"investigation" includes entry to a structure in Area A, the exercise
of powers of search and questioning and the apprehension of a
suspected offender;
(f) "good oilfield practice" means all those things that are generally
accepted as good and safe in the carrying on of petroleum operations;
(g) "Model Production Sharing Contract" means the model contract as
appears in Annex C, on the basis of which production sharing contracts
for Area A should be concluded, as may be modified from time to time
by the Ministerial Council in accordance with paragraph 1 (c) of
Article 6 of this Treaty;
(h) "petroleum" means
(a) any naturally occurring hydrocarbon, whether in a gaseous, liquid or
solid state;
(b) any naturally occurring mixture of hydrocarbons, whether in a gaseous,
liquid or solid state; or
(c) any petroleum as defined by sub-paragraph (a) or (b) of this paragraph
that has been returned to a reservoir in the contract area;
(i) "Petroleum Mining Code" means the "Petroleum Mining Code for Area A of
the Zone of Cooperation" to govern operational activities relating to
exploration for and exploitation of the petroleum resources in
Area A of the Zone of Cooperation contained in Annex B, as amended
from time to time by the Ministerial Council in accordance with
paragraph 1 (b) of Article 6 of this Treaty;
(j) "petroleum operations" means activities undertaken to produce
petroleum and includes exploration, development, field processing,
production and pipeline operations, and marketing authorized or
contemplated under a production sharing contract;
(k) "Resource Rent Tax" means tax imposed by the
Petroleum Resource Rent Tax Act 1987 of Australia as amended from time
to time;
(l) "structure" means an installation or structure used to carry out
petroleum operations;
(m) "Taxation Code" means the "Taxation Code for the Avoidance of Double
Taxation in Respect of Activities Connected with Area A of the Zone of
Cooperation", contained in Annex D;
(n) "taxation law" means the federal law of Australia or the law of the
Republic of Indonesia, from time to time in force, in respect of taxes
to which this Treaty applies but shall not include a tax agreement
between the Contracting States and a tax agreement of either
Contracting State with a third country;
(o) "Treaty" means this Treaty including Annexes A, B, C and D;
(p) "Zone of Cooperation" refers to the area so designated and described
in Annex A and illustrated in the maps forming part of that Annex,
which consists of the whole of the area embraced by Areas A, B and C
designated in that Annex. 2. For the purposes of Article 10 of this
Treaty and the Taxation Code, resident of a Contracting State means:
(a) in the case of Australia, a person who is liable to tax in Australia
by reason of being a resident of Australia under the tax law of
Australia; and
(b) in the case of the Republic of Indonesia, a person who is liable to
tax in the Republic of Indonesia by reason of being a resident of the
Republic of Indonesia under the tax law of the Republic of Indonesia,
but does not include any person who is liable to tax in that
Contracting State in respect only of income from sources in that
Contracting State. 3. Where by reason of the provisions of paragraph 2
of this Article, an individual is a resident of both Contracting
States, then the status of the person shall be determined as follows:
(a) the person shall be deemed to be a resident solely of the Contracting
State in which a permanent home is available to the person;
(b) if a permanent home is available to the person in both Contracting
States, or in neither of them, the person shall be deemed to be a
resident solely of the Contracting State in which the person has an
habitual abode;
(c) if the person has an habitual abode in both Contracting States, or if
the person does not have an habitual abode in either of them, the
person shall be deemed to be a resident solely of the Contracting
State with which the person's personal and economic relations are the
closer. 4. Where by reason of the provisions of paragraph 2 of this
Article a person other than an individual is a resident of both
Contracting States, then it shall be deemed to be a resident solely of
the Contracting State in which its place of effective management is
situated.
Article 2
The Zone 1. A Zone of Cooperation is hereby designated in an area between the
Indonesian Province of East Timor and northern Australia, which comprises
Areas A, B and C. 2. Within the Zone of Cooperation activities in relation to
the exploration for and exploitation of petroleum resources shall be conducted
on the following basis:
(a) In Area A, there shall be joint control by the Contracting States of
the exploration for and exploitation of petroleum resources, aimed at
achieving optimum commercial utilization thereof and equal sharing
between the two Contracting States of the benefits of the exploitation
of petroleum resources, as provided for in this Treaty;
(b) In Area B, Australia shall make certain notifications and share with
the Republic of Indonesia Resource Rent Tax collections arising from
petroleum production on the basis of Article 4 of this Treaty; and
(c) In Area C, the Republic of Indonesia shall make certain notifications
and share with Australia Contractors' Income Tax collections arising
from petroleum production on the basis of Article 4 of this Treaty. 3.
Nothing contained in this Treaty and no acts or activities taking
place while this Treaty is in force shall be interpreted as
prejudicing the position of either Contracting State on a permanent
continental shelf delimitation in the Zone of Cooperation nor shall
anything contained in it be considered as affecting the respective
sovereign rights claimed by each Contracting State in the Zone of
Cooperation. 4. Notwithstanding the conclusion of this Treaty, the
Contracting States shall continue their efforts to reach agreement on
a permanent continental shelf delimitation in the Zone of Cooperation.
PART II
EXPLORATION AND EXPLOITATION
IN THE ZONE OF COOPERATION
Article 3
Area A 1. In relation to the exploration for and exploitation of petroleum
resources in Area A, the rights and responsibilities of the two Contracting
States shall be exercised by the Ministerial Council and the Joint Authority
in accordance with this Treaty. Petroleum operations in Area A shall be
carried out through production sharing contracts. 2. The Joint Authority shall
enter into each production sharing contract with limited liability
corporations specifically established for the sole purpose of the contract.
This provision shall also apply to the successors or assignees of such
corporations.
Article 4
Area B and Area C 1. In relation to the exploration for and exploitation of
petroleum resources in Area B Australia shall:
(a) notify the Republic of Indonesia of the grant, renewal, surrender,
expiry and cancellation of titles made by Australia being exploration
permits, retention leases and production licences; and
(b) pay to the Republic of Indonesia ten (10) per cent of gross Resource
Rent Tax collected by Australia from corporations producing petroleum
from Area B equivalent to sixteen (16) per cent of net Resource Rent
Tax collected, calculated on the basis that general company tax is
payable at the maximum rate. 2. In relation to exploration for and
exploitation of petroleum resources in Area C the Republic of
Indonesia shall:
(a) notify Australia of the grant, renewal, surrender, expiry and
cancellation of petroleum exploration and production agreements made
by the Republic of Indonesia; and
(b) pay to Australia ten (10) per cent of Contractors' Income Tax
collected by the Republic of Indonesia from corporations producing
petroleum from Area C. 3. In the event that Australia changes the
basis upon which the Resource Rent Tax or general company tax is
calculated or that the Republic of Indonesia changes the basis upon
which Contractors' Income Tax is calculated, the Contracting States
shall review the percentages set out in paragraphs 1 (b) and 2 (b) of
this Article and agree on new percentages, ensuring that the relative
shares paid by each contracting State to the other in respect of
revenue collected from corporations producing petroleum in Area B and
Area C remain the same. 4. In the event of any change occurring in the
relevant taxation regimes of either Contracting State, the Contracting
States shall review the formulation set out in paragraphs 1 (b) and 2
(b) of this Article and agree on a new formulation, ensuring that the
relative shares paid by each Contracting State to the other in respect
of revenue collected from corporations producing petroleum in Area B
and Area C remain the same. 5. With regard to Area B and Area C, the
Contracting States shall enter into necessary administrative
arrangements to give effect to the sharing arrangements in the two
Areas as provided in paragraph 1 (b) and paragraph 2 (b) of this
Article at the time that production from either Area commences. In
particular, the arrangements shall provide for the manner in which
such a share shall be paid from one Contracting State to the other
Contracting State. A Contracting State when making a payment to the
other Contracting State shall provide information on the basis on
which the relevant payment was calculated. 6. The Contracting States
shall take necessary measures to ensure the timely and optimum
utilization of the petroleum resources in Area B and Area C.
PART III
THE MINISTERIAL COUNCIL
Article 5
The Ministerial Council 1. A Ministerial Council for the Zone of Cooperation
is hereby established. 2. The Ministerial Council shall consist of those
Ministers who may from time to time be designated for that purpose by the
Contracting States provided that, at any one time, there shall be an equal
number of Ministers designated by each Contracting State. 3. The
Ministerial Council shall meet annually or as often as may be required. 4. The
Ministerial Council shall normally meet alternately in Australia or in the
Republic of Indonesia. Its meetings shall be chaired alternately by a Minister
nominated by each Contracting State. 5. Decisions of the Ministerial Council
shall be arrived at by consensus. The Ministerial Council may establish
procedures for taking decisions out of session.
Article 6
Functions of the Ministerial Council 1. The Ministerial Council shall have
overall responsibility for all matters relating to the exploration for and
exploitation of the petroleum resources in Area A of the Zone of Cooperation
and such other functions relating to the exploration for and exploitation of
petroleum resources as the Contracting States may entrust to it. The functions
of the Ministerial Council shall include:
(a) giving directions to the Joint Authority on the discharge of its
functions;
(b) of its own volition or on recommendation by the Joint Authority, in a
manner not inconsistent with the objectives of this Treaty, amending
the Petroleum Mining Code to facilitate petroleum operations in Area
A;
(c) of its own volition or on recommendation by the Joint Authority, in a
manner not inconsistent with the objectives of this Treaty, modifying
the Model Production Sharing Contract to facilitate petroleum
operations in Area A;
(d) approving production sharing contracts which the Joint Authority may
propose to enter into with corporations;
(e) approving the termination of production sharing contracts entered into
between the Joint Authority and corporations;
(f) approving the variation of the following provisions of a production
sharing contract, with the agreement of the contractor:
(i) the Joint Authority's or the contractor's production share;
(ii) the operating cost recovery provisions;
(iii) the term of the contract; and
(iv) the contract area relinquishment provisions;
(g) approving the variation of the annual contract service fee;
(h) giving approval to the Joint Authority to market any or all petroleum
production in circumstances determined by the Ministerial Council;
(i) approving the transfer of rights and responsibilities by contractors
to other corporations that will then become contractors;
(j) approving the distribution to Australia and the Republic of Indonesia
of revenues dervied from production sharing contracts in Area A;
(k) through consultation, settling disputes in the Joint Authority;
(l) approving financial estimates of income and expenditure of the
Joint Authority;
(m) approving rules, regulations and procedures for the effective
functioning of the Joint Authority including staff regulations;
(n) reviewing the operation of this Treaty and making recommendations to
the Contracting States that the Council may consider necessary for the
amendment of this Treaty;
(o) appointment of the Executive Directors of the Joint Authority;
(p) at the request of a member of the Ministerial Council inspecting and
auditing the Joint Authority's books and accounts;
(q) approving the result of inspections and audits of contractors' books
and accounts conducted by the Joint Authority;
(r) considering and adopting the annual report of the Joint Authority; and
(s) reviewing the distribution among the Republic of Indonesia, Australia
and third countries, of expenditure on petroleum operations related to
Area A. 2. The Ministerial Council in exercising its functions shall
ensure the achievement of the optimum commercial utilization of the
petroleum resources of Area A consistent with good oilfield and sound
environmental practice. 3. The Ministerial Council shall authorize the
Joint Authority to take all necessary steps to enable the commencement
of exploration for and exploitation of the petroleum resources of Area
A as soon as possible after the entry into force of this Treaty.
PART IV
THE JOINT AUTHORITY
Article 7
The Joint Authority 1. A Joint Authority is hereby established. 2. The
Joint Authority shall have juridical personality and such legal capacities
under the law of both Contracting States as are necessary for the exercise of
its powers and the performance of its functions. In particular, the Joint
Authority shall have the capacity to contract, to acquire and dispose of
movable and immovable property and to institute and be party to legal
proceedings. 3. The Joint Authority shall be responsible to the
Ministerial Council. 4. Decisions of the Executive Directors of the Joint
Authority shall be arrived at by consensus. Where consensus cannot be reached,
the matter shall be referred to the Ministerial Council. 5. Unless otherwise
decided by the Ministerial Council, the Joint Authority shall have its head
office in the Republic of Indonesia and an office in Australia, each of which
shall be headed by an Executive Director. 6. The Joint Authority shall
commence to function on entry into force of this Treaty.
Article 8
Functions of the Joint Authority
The Joint Authority, subject to directions from the Ministerial Council, shall
be responsible for the management of activities relating to exploration for
and exploitation of the petroleum resources in Area A in accordance with this
Treaty, and in particular the Petroleum Mining Code and with production
sharing contracts. These management functions shall be:
(a) dividing Area A into contract areas, issuing prospecting approvals and
commissioning environmental investigations prior to contract areas
being advertised, advertising of contract areas, assessing
applications, and making recommendations to the Ministerial Council on
applications for production sharing contracts;
(b) entering into production sharing contracts with corporations, subject
to Ministerial Council approval, and supervising the activities of the
contractor pursuant to the requirements of the Petroleum Mining Code,
including regulations and directions thereunder, and the terms and
conditions set out in the contract;
(c) recommending to the Ministerial Council the termination of production
sharing contracts where contractors do not meet the terms and
conditions of those contracts;
(d) terminating production sharing contracts by agreement with
contractors;
(e) recommending to the Ministerial Council the approval of transfer of
rights and responsibilities by contractors to other corporations that
will then become contractors;
(f) collecting and, with approval of the Ministerial Council, distributing
between the two Contracting States the proceeds of the
Joint Authority's share of petroleum production from contracts;
(g) preparation of annual estimates of income and expenditure of the
Joint Authority for submission to the Ministerial Council. Any
expenditure shall only be made in accordance with estimates approved
by the Ministerial Council or otherwise in accordance with regulations
and procedures approved by the Council;
(h) controlling movements into, within and out of Area A of vessels,
aircraft, structures and other equipment employed in exploration for
and exploitation of petroleum resources; and, subject to Article 23,
authorizing the entry of employees of contractors and their
subcontractors and other persons into Area A;
(i) establishment of safety zones and restricted zones, consistent with
international law, to ensure the safety of navigation and petroleum
operations;
(j) issuing regulations and giving directions under the Petroleum Mining
Code on all matters related to the supervision of and control of
petroleum operations including on health, safety, environmental
protection and assessments and work practices, pursuant to the
Petroleum Mining Code;
(k) making recommendations to the Ministerial Council to amend the
Petroleum Mining Code and to modify the Model Production Sharing
Contract consistent with the objectives of this Treaty;
(l) requesting action by the appropriate Australian and Indonesian
authorities consistent with this Treaty
(i) for search and rescue operations in Area A; and
(ii) in the event of terrorist threat to the vessels and structures engaged
in petroleum operations in Area A;
(m) requesting assistance with pollution prevention measures, equipment
and procedures from appropriate Australian or Indonesian authorities
or other bodies or persons;
(n) preparation of annual reports for submission to the
Ministerial Council;
(o) with the approval of the Ministerial Council, the variation of the
following provisions of a production sharing contract with the
agreement of the contractor:
(i) the Joint Authority's or the contractor's production share;
(ii) the operating cost recovery provisions;
(iii) the term of the contract; and
(iv) the contract area relinquishment provisions;
(p) with the approval of the Ministerial Council, the variation of the
annual contract service fee;
(q) variation, with the agreement of the contractor, of provisions in the
production sharing contract other than those in paragraphs (o) and (p)
of this Article;
(r) with the approval of the Ministerial Council, the marketing of any or
all petroleum production in circumstances determined by the
Ministerial Council;
(s) inspecting and auditing contractors' books and accounts relating to
the production sharing contract for any calendar year;
(t) monitoring and reporting to the Ministerial Council the distribution
among the Republic of Indonesia, Australia and third countries, of
expenditure on petroleum operations related to Area A; and
(u) such other functions as may be conferred on it by the
Ministerial Council.
Article 9
Structure of the Joint Authority 1. The Joint Authority shall consist of:
(a) Executive Directors appointed by the Ministerial Council comprising an
equal number of persons nominated by each Contracting State;
(b) the following three Directorates responsible to the Executive
Directors:
(i) a Technical Directorate responsible for operations involving
exploration for and exploitation of petroleum resources including
operations in respect of functions referred to in paragraph (1) of
Article 8;
(ii) a Financial Directorate responsible for collecting fees and proceeds
from the sale of the Joint Authority's share of production; and
(iii) a Legal Directorate responsible for providing advice on any legal
issues relating to production sharing contracts and on the operation
of law applying in Area A; and
(c) a Corporate Services Directorate, to provide administrative support to
the Executive Directors and the three other Directorates and to
service the meetings of the Ministerial Council. 2. The personnel of
the Joint Authority shall be appointed by the Executive Directors
under terms and conditions that have regard to the proper functioning
of the Joint Authority and the nature of the exploration for and
exploitation of petroleum resources being undertaken from time to time
in Area A from amongst individuals nominated by each Contracting
State. Of the four Directors heading the Directorates, the Executive
Directors shall appoint two from each Contracting State. If an
Indonesian nominee is appointed to head the Technical Directorate,
then an Australian nominee shall be appointed to head the Financial
Directorate, and vice versa. 3. Unless otherwise decided by the
Ministerial Council, the Technical Directorate shall be in the
Joint Authority office located in Australia. 4. The Executive
Directors and the four Directors shall constitute the Executive Board.
5. The Executive Directors and personnel of the Joint Authority shall
have no financial interest in any activity relating to exploration for
and exploitation of petroleum resources in Area A.
Article 10
Taxation of the Joint Authority and its Officers 1. The Joint Authority shall
be exempt from the following existing taxes:
(a) in Australia, the income tax imposed under the federal law of
Australia;
(b) in Indonesia, the income tax (Pajak-Penghasilan) imposed under the law
of the Republic of Indonesia, as well as any identical or
substantially similar taxes which are imposed after the date of
signature of this Treaty in addition to, or in place of, the existing
taxes. 2. The Executive Directors and other officers of the Joint
Authority:
(a) shall be exempt from taxation of salaries, allowances and other
emoluments paid to them by the Joint Authority in connection with
their service with the Joint Authority other than taxation under the
law of the Contracting State in which they are deemed under the
provisions of Article 1 of this Treaty to be resident for taxation
purposes; and
(b) shall, at the time of first taking up a post with the Joint Authority
located in the Contracting State in which they are not resident under
the provisions of Article 1 of this Treaty, be exempt from customs
duties and other such charges (except payments for services) in
respect of imports of furniture and other households and personal
effects in their ownership or possession or already ordered by them
and intended for their personal use or for their establishment; such
goods shall be imported within six months of an officer's first entry
but in exceptional circumstances an extension of time shall be granted
by the Government of the Contracting State; goods which have been
acquired or imported by officers and to which exemptions under this
sub-paragraph apply shall not be given away, sold, lent, hired out, or
otherwise disposed of except under conditions agreed in advance with
the Government of the Contracting State in which the officer is
located. 3. The Ministerial Council may recommend to the Contracting
States that additional privileges be conferred on the Joint Authority
or its officers, if that is necessary to promote the effective
functioning of the Joint Authority. Such privileges shall be conferred
only following the agreement of the two Contracting States.
Article 11
Financing 1. The Joint Authority shall be financed from fees collected under
Part VI of the Petroleum Mining Code, provided that the Contracting States
shall advance such funds as they jointly determine to be necessary to enable
the Joint Authority to commence operations. 2. In the event that the
Joint Authority cannot meet an obligation under an arbitral award arising from
a dispute under a production sharing contract, the Contracting States shall
contribute the necessary funds in equal shares to enable the Joint Authority
to meet that obligation.
PART V
COOPERATION ON CERTAIN MATTERS IN RELATION TO
AREA A
Article 12
Surveillance 1. For the purposes of this Treaty, both Contracting States shall
have the right to carry out surveillance activities in Area A. 2. The
Contracting States shall cooperate on and coordinate any surveillance
activities carried out in accordance with paragraph 1 of this Article. 3. The
Contracting States shall exchange information derived from any surveillance
activities carried out in accordance with paragraph 1 of this Article.
Article 13
Security Measures 1. The Contracting States shall exchange information on
likely threats to, or security incidents relating to, exploration for and
exploitation of petroleum resources in Area A. 2. The Contracting States shall
make arrangements for responding to security incidents in Area A.
Article 14
Search and Rescue
The Contracting States shall cooperate on arrangements for search and rescue
in Area A taking into account generally accepted international rules,
regulations and procedures established through competent international
organizations.
Article 15
Air Traffic Services
The Contracting States shall cooperate on the provision of air traffic
services in Area A taking into account generally accepted international rules,
regulations and procedures established through competent international
organizations.
Article 16
Hydrographic and Seismic Surveys 1. Both Contracting States shall have the
right to carry out hydrographic surveys to facilitate petroleum operations in
Area A. Both Contracting States shall cooperate on:
(a) the conduct of such surveys, including the provision of necessary
on-shore facilities; and
(b) exchanging hydrographic information relevant to petroleum operations
in Area A. 2. For the purposes of this Treaty, the Contracting States
shall cooperate in facilitating the conduct of seismic surveys in Area
A, including in the provision of necessary on-shore facilities.
Article 17
Marine Scientific Research
Without prejudice to the rights under international law in relation to marine
scientific research in Area A claimed by the two Contracting States, a
Contracting State which receives a request for consent to conduct marine
scientific research into the non-living resources of the continental shelf in
Area A shall consult with the other Contracting State on whether the research
project is related to the exploration for and exploitation of petroleum
resources in Area A. If the Contracting States decide that the research is so
related they shall seek the views of the Joint Authority on the research
project and, in the light of such views, mutually decide on the regulation,
authorization and conduct of the research including the duty to provide data,
samples and results of such research to both Contracting States and the
Joint Authority and participation by both Contracting States in the research
project.
Article 18
Protection of the Marine Environment 1. The Contracting States shall cooperate
to prevent and minimize pollution of the marine environment arising from the
exploration for and exploitation of petroleum in Area A. In particular:
(a) the Contracting States shall provide such assistance to the
Joint Authority as may be requested pursuant to paragraph (m) of
Article 8 of this Treaty; and
(b) where pollution of the marine environment occurring in Area A spreads
beyond Area A, the Contracting States shall cooperate in taking action
to prevent, mitigate and eliminate such pollution. 2. Pursuant to
paragraph (j) of Article 8 of this Treaty the Joint Authority shall
issue regulations to protect the marine environment in Area A. It
shall establish a contingency plan for combating pollution from
petroleum operations in that Area.
Article 19
Liability of Contractors for Pollution
of the Marine Environment
Contractors shall be liable for damage or expenses incurred as a result of
pollution of the marine environment arising out of petroleum operations in
Area A in accordance with contractual arrangements with the Joint Authority
and the law of the State in which a claim in respect of such damage or
expenses is brought.
Article 20
Unitization between Area A and Areas outside Area A
If any single accumulation of petroleum extends across any of the boundary
lines of Area A of the Zone of Cooperation as designated and described in
Article 1 and Annex A of this Treaty, and the part of such accumulation that
is situated on one side of a line is exploitable, wholly or in part, from the
other side of the line, the Contracting States shall seek to reach agreement
on the manner in which the accumulation shall be most effectively exploited
and on the equitable sharing of the benefits arising from such exploitation.
Article 21
Construction of Facilities
In the event that exploration for and exploitation of petroleum resources in
Area A necessitates the construction of facilities and provision of services
outside Area A, the Contracting States shall provide every assistance to
contractors and the Joint Authority to enable the construction and operation
of those facilities, and the provision of those services. Construction and
operation of such facilities and provision of such services shall be subject
to the law and regulations of the relevant Contracting State and any terms and
conditions set by the Contracting States.
PART VI
APPLICABLE LAWS
Article 22
Law Applicable to Production Sharing Contracts
The law applicable to a production sharing contract shall be specified in that
contract.
Article 23
Application of Customs, Migration
and Quarantine Laws 1. Each Contracting State may, subject to paragraphs 3 and
5 of this Article, apply customs, migration and quarantine laws to persons,
equipment and goods entering its territory from, or leaving its territory for,
Area A. The Contracting States may adopt arrangements to facilitate such entry
and departure. 2. Contractors shall ensure, unless otherwise authorized by the
Contracting States, that persons, equipment and goods do not enter structures
in Area A without first entering Australia or the Republic of Indonesia, and
that their employees and the employees of their subcontractors are authorized
by the Joint Authority to enter Area A. 3. One Contracting State may request
consultations with the other Contracting State in relation to the entry of
particular persons, equipment and goods to structures in Area A aimed at
controlling the movement of such persons, equipment or goods. 4. Nothing in
this Article prejudices the right of either Contracting State to apply
customs, migration and quarantine controls to persons, equipment and goods
entering Area A without the authority of either Contracting State. The
Contracting States may adopt arrangements to coordinate the exercise of such
rights.
5.(a) Goods and equipment entering Area A for purposes related to petroleum
operations shall not be subject to customs duties.
(b) Goods and equipment leaving or in transit through a Contracting State
for the purpose of entering Area A for purposes related to petroleum
operations shall not be subject to customs duties.
(c) Goods and equipment leaving Area A for the purpose of being
permanently transferred to a part of a Contracting State may be
subject to customs duties of that Contracting State.
Article 24
Employment 1. The Contracting States shall take appropriate measures to ensure
that preference is given in employment in Area A to nationals or permanent
residents of Australia and the Republic of Indonesia, and to their employment
in equivalent numbers over the term of a production sharing contract, but,
with due regard to efficient operations and to good oilfield practice. 2. The
terms and conditions under which persons are employed on structures in Area A
shall be governed by employment contracts or collective agreements. The terms
and conditions shall include provisions on insurance and compensation in
relation to employment injuries, including death or disability benefits, and
may provide for use of an existing compensation system established under the
law of either Contracting State. The terms and conditions shall also include
provisions in relation to remuneration, periods of duty or overtime, leave and
termination. The terms and conditions shall be no less favourable than those
which would apply from time to time to comparable categories of employment in
both Australia and the Republic of Indonesia. 3. Paragraph 2 of this Article
shall also apply to persons employed on seismic, drill, supply and service
vessels regularly engaged in activities related to petroleum operations in
Area A, regardless of the nationality of the vessel. 4. In relation to the
provision of facilities and opportunities, there shall be no discrimination on
the basis of nationality amongst persons to which paragraphs 2 and 3 of this
Article apply. 5. Disputes arising between employers and employees shall be
settled by negotiation in the first instance. Disputes which cannot be settled
by negotiation shall be settled either by recourse to a tripartite dispute
settlement committee, comprising representatives of employers, employees and
persons nominated by the Contracting States, or by recourse to a conciliation
and arbitration system available in either Contracting State. 6. Employer and
employee associations recognised under the law of either Contracting State may
respectively represent employers and employees in the negotiation of contracts
or collective agreements and in conciliation and arbitration proceedings. 7.
An employment contract or collective agreement shall provide that it shall be
subject to the law of one or other Contracting State and shall identify,
consistent with paragraph 5 of this Article, the applicable dispute settlement
mechanism. Any arbitration decision shall be enforceable under the law of the
Contracting State under which it is made.
Article 25
Health and Safety for Workers
The Joint Authority shall develop, and contractors shall apply, occupational
health and safety standards and procedures for persons employed on structures
in Area A that are no less effective than those standards and procedures that
would apply in relation to persons employed on similar structures in both
Australia and the Republic of Indonesia. The Joint Authority may adopt,
consistent with this Article, standards and procedures taking into account an
existing system established under the law of either Contracting State.
Article 26
Petroleum Industry Vessels
Except as otherwise provided in this Treaty, vessels engaged in petroleum
operations shall be subject to the law of the Contracting State whose
nationality they possess and, unless they are a vessel with the nationality of
the other Contracting State, the law of the Contracting State out of whose
ports they operate, in relation to safety and operating standards, and crewing
regulations. Such vessels that enter Area A and do not operate out of either
Contracting State shall be subject to relevant international safety and
operating standards under the law of both Contracting States.
Article 27
Criminal Jurisdiction 1. Subject to paragraph 3 of this Article a national or
permanent resident of a Contracting State shall be subject to the criminal law
of that State in respect of acts or omissions occurring in Area A connected
with or arising out of exploration for and exploitation of petroleum
resources, provided that a permanent resident of a Contracting State who is a
national of the other Contracting State shall be subject to the criminal law
of the latter State.
2.(a) Subject to paragraph 3 of this Article, a national of a third State, not
being a permanent resident of either Contracting State, shall be subject to
the criminal law of both Contracting States in respect of acts or omissions
occurring in Area A connected with or arising out of the exploration for and
exploitation of petroleum resources. Such a person shall not be subject to
criminal proceedings under the law of one Contracting State if he or she has
already been tried and discharged or acquitted by a competent tribunal or
already undergone punishment for the same act or omission under the law of the
other Contracting State or where the competent authorities of one Contracting
State, in accordance with its law, have decided in the public interest to
refrain from prosecuting the person for that act or omission.
(b) In cases referred to in sub-paragraph (a) of this paragraph, the
Contracting States shall, as and when necessary, consult each other to
determine which criminal law is to to be applied, taking into account
the nationality of the victim and the interests of the Contracting
State most affected by the alleged offence. 3. The criminal law of the
flag State shall apply in relation to acts or omissions on board
vessels including seismic or drill vessels in, or aircraft in flight
over, Area A.
4.(a) The Contracting States shall provide assistance to and cooperate with
each other, including through agreements or arrangements as appropriate, for
the purposes of enforcement of criminal law under this Article, including the
obtaining of evidence and information.
(b) Each Contracting State recognizes the interest of the other
Contracting State where a victim of an alleged offence is a national
of that other State and shall keep that other State informed to the
extent permitted by its law of action being taken with regard to the
alleged offence. 5. The Contracting States may make arrangements
permitting officials of one Contracting State to assist in the
enforcement of the criminal law of the other Contracting State. Where
such assistance involves the detention of a person who under paragraph
1 of this Article is subject to the jurisdiction of the other
Contracting State that detention may only continue until it is
practicable to hand the person over to the relevant officials of that
other Contracting State.
Article 28
Civil Actions
Claims for damages or restitution of expenses as a result of activities in
Area A may be brought in the Contracting State which has or whose nationals or
permanent residents have suffered the damage or incurred the expense. The
court in which the action is brought shall apply the law and regulations of
that State.
Article 29
Application of Taxation Law 1. For the purposes of the taxation law related
directly or indirectly to:
(a) the exploration for or the exploitation of petroleum in Area A; or
(b) acts, matters, circumstances and things touching, concerning, arising
out of or connected with any such exploration or exploitation, Area A
shall be deemed to be, and be treated by, each Contracting State as
part of that Contracting State. 2. In the application of the taxation
law:
(a) in Area A;
(b) to interest paid by a contractor; or
(c) to royalties paid by a contractor, each Contracting State shall grant
relief from double taxation in accordance with the Taxation Code. 3. A
Contracting State shall not impose a tax not covered by the provisions
of the Taxation Code in respect of or applicable to:
(a) the exploration for or exploitation of petroleum in Area A; or
(b) any petroleum exploration or exploitation related activity carried on
in Area A, unless the other Contracting State consents to the
imposition of that tax.
PART VII
SETTLEMENT OF DISPUTES
Article 30
Settlement of Disputes 1. Any dispute arising between the Contracting States
concerning the interpretation or application of this Treaty shall be resolved
by consultation or negotiation between the Contracting States. 2. Each
production sharing contract entered into by the Joint Authority shall contain
provisions to the effect that any dispute concerning the interpretation or
application of such contract shall be submitted to a specified form of binding
commercial arbitration. The Contracting States shall facilitate the
enforcement in their respective courts of arbitral awards made pursuant to
such arbitration.
PART VIII
FINAL CLAUSES
Article 31
Amendment 1. This Treaty may be amended at any time by agreement between the
Contracting States. 2. The Petroleum Mining Code, in accordance with paragraph
1 (b) of Article 6 of this Treaty and the Model Production Sharing Contract,
in accordance with paragraph 1 (c) of Article 6 of this Treaty, may also be
amended or modified by decision of the Ministerial Council. Such amendments or
modifications shall have the same status as the Petroleum Mining Code and the
Model Production Sharing Contract.
Article 32
Entry into Force
This Treaty shall enter into force thirty (30) days after the date on which
the Contracting States have notified each other in writing that their
respective requirements for entry into force of this Treaty have been complied
with.
Article 33
Term of this Treaty 1. This Treaty shall remain in force for forty (40) years
from the date of entry into force of this Treaty. 2. Unless the two
Contracting States agree otherwise, this Treaty shall continue in force after
the initial forty (40) year term for successive terms of twenty (20) years,
unless by the end of each term, including the initial term of forty years, the
two Contracting States have concluded an agreement on a permanent continential
shelf delimitation in the area covered by the Zone of Cooperation. 3. Where
the Contracting States have not concluded an agreement on a permanent
continental shelf delimitation in the area covered by the Zone of Cooperation
five years prior to the end of any of the terms referred to in paragraphs 1 or
2 of this Article, representatives of the two Contracting States shall meet
with a view to reaching agreement on such permanent continental shelf
delimitation. 4. This Article shall be without prejudice to the continued
operation of Article 34 of this Treaty.
Article 34
Rights of Contractors 1. In the event that
(a) this Treaty ceases to be in force following conclusion of an agreement
between the Contracting States on permanent continental shelf
delimitation in the area of the Zone of Cooperation; and
(b) there are in existence immediately prior to the date on which this
Treaty ceases to be in force, production sharing contracts with the
Joint Authority, production sharing contracts shall continue to apply
to each Contracting State or some other person nominated by the
Contracting State concerned, in place of the Joint Authority, in so
far as the contract is to be performed within the territorial
jurisdiction of each Contracting State, having regard to the agreement
on delimitation. Each Contracting State shall apply to contractors
performing contracts within its territorial jurisdiction a regime no
more onerous than that set out in this Treaty and the relevant
production sharing contract. 2. The two Contracting States shall at
the time of the conclusion of the permanent delimitation agreement
make arrangements to give effect to paragraph 1 of this Article. IN
WITNESS WHEREOF the undersigned, being duly authorized thereto by
their respective Governments, have signed this Treaty. DONE over the
Zone of Cooperation on this eleventh day of December, one thousand
nine hundered and eighty nine, in two originals in the English
language.
FOR AUSTRALIA FOR THE REPUBLIC OF
GARETH EVANS INDONESIA
MINISTER FOR FOREIGN ALI ALATAS
AFFAIRS AND TRADE MINISTER FOR FOREIGN AFFAIRS
ANNEX A
DESIGNATION AND DESCRIPTION INCLUDING MAPS AND COORDINATES
OF THE AREAS COMPRISING THE ZONE OF COOPERATION NOTE Where for the purposes of
this Treaty it is necessary to determine the position on the surface of the
Earth of a point, line or area, that position shall be determined by reference
to the Australian Geodetic Datum, that is to say, by reference to a spheroid
having its centre at the centre of the Earth and a major (equatorial) radius
of 6 378 160 metres and a flattening of 1/298.25 and by reference to the
position of the Johnston Geodetic Station in the Northern Territory of
Australia. That station shall be taken to be situated at Latitude 25 degrees
56'54.5515" South and at Longitude 133 degrees 12'30.0771" East and to have a
ground level of 571.2 metres above the spheroid referred to above.
ZONE OF COOPERATION WHOLE The area bounded by the line -
a) commencing at the point of Latitude 9 degrees 12'19" South, Longitude 127
degrees 33'32" East;
b) running thence south-easterly along the geodesic to the point of Latitude 9
degrees 22'53" South, Longitude 127 degrees 48'42" East;
c) thence south-easterly along the geodesic to the point of Latitude 9 degrees
28'00" South, Longitude 127 degrees 56'00" East;
d) thence south-easterly along the geodesic to the point of Latitude 9 degrees
29'57" South, Longitude 127 degrees 58'47" East;
e) thence south-easterly along the geodesic to the point of Latitude 10
degrees 29'17" South, Longitude 128 degrees 12'24" East;
f) thence south-easterly along the geodesic to the point of Latitude 11
degrees 42'10" South, Longitude 128 degrees 29'10" East;
g) thence south-westerly along the geodesic to the point of Latitude 12
degrees 3'17" South, Longitude 127 degrees 45'00" East;
h) thence south-westerly along the geodesic to the point of Latitude 12
degrees 15'28" South, Longitude 127 degrees 08'28" East;
i) thence north-westerly along the geodesic to the point of Latitude 11
degrees 20'08" South, Longitude 126 degrees 31'54" East; j) thence
north-westerly along the geodesic to the point of Latitude 10 degrees 28'00"
South, Longitude 126 degrees 00'00" East;
k) thence north-easterly along the geodesic to the point of Latitude 10
degrees 06'40" South, Longitude 126 degrees 00'25" East;
l) thence north-easterly along the geodesic to the point of Latitude 9 degrees
46'01" South, Longitude 126 degrees 00'50" East; and
m) thence north-easterly along the geodesic to the point of commencement.
ZONE OF COOPERATION AREA A The area bounded by the line -
a) commencing at the point of Latitude 9 degrees 22'53" South, Longitude 127
degrees 48'42" East;
b) running thence south-westerly along the geodesic to the point of Latitude
10 degrees 06'40" South, Longitude 126 degrees 00'25" East;
c) thence south-westerly along the geodesic to the point of Latitude 10
degrees 28'00" South, Longitude 126 degrees 00'00" East;
d) thence south-easterly along the geodesic to the point of Latitude 11
degrees 20'08" South, Longitude 126 degrees 31'54" East;
e) thence north-easterly along the geodesic to the point of Latitude 11
degrees 19'46" South, Longitude 126 degrees 47'04" East;
f) thence north-easterly along the geodesic to the point of Latitude 11
degrees 17'36" South, Longitude 126 degrees 57'07" East;
g) thence north-easterly along the geodesic to the point of Latitude 11
degrees 17'30" South, Longitude 126 degrees 58'13" East;
h) thence north-easterly along the geodesic to the point of Latitude 11
degrees 14'24" South, Longitude 127 degrees 31'33" East;
i) thence north-easterly along the geodesic to the point of Latitude 10
degrees 55'26" South, Longitude 127 degrees 47'04" East;
j) thence north-easterly along the geodesic to the point of Latitude 10
degrees 53'42" South, Longitude 127 degrees 48'45" East;
k) thence north-easterly along the geodesic to the point of Latitude 10
degrees 43'43" South, Longitude 127 degrees 59'16" East;
l) thence north-easterly along the geodesic to the point of Latitude 10
degrees 29'17" South, Longitude 128 degrees 12'24" East;
m) thence north-westerly along the geodesic to the point of Latitude 9 degrees
29'57" South, Longitude 127 degrees 58'47" East;
n) thence north-westerly along the geodesic to the point of Latitude 9 degrees
28'00" South, Longitude 127 degrees 56'00" East; and
o) thence north-westerly along the geodesic to the point of commencement.
ZONE OF COOPERATION AREA B The area bounded by the line -
a) commencing at the point of Latitude 10 degrees 29'17" South, Longitude 128
degrees 12'24" East;
b) running thence south-easterly along the geodesic to the point of Latitude
11 degrees 42'10" South, Longitude 128 degrees 29'10" South;
c) thence south-westerly along the geodesic to the point of Latitude 12
degrees 03'17" South, Longitude 127 degrees 45'00" East;
d) thence south-westerly along the geodesic to the point of Latitude 12
degrees 15'28" South, Longitude 127 degrees 08'28" East;
e) thence north-westerly along the geodesic to the point of Latitude 11
degrees 20'08" South, Longitude 126 degrees 31'54" East;
f) thence north-easterly along the geodesic to the point of Latitude 11
degrees 19'46" South, Longitude 126 degrees 47'04" East;
g) thence north-easterly along the geodesic to the point of Latitude 11
degrees 17'36" South, Longitude 126 degrees 57'07" East;
h) thence north-easterly along the geodesic to the point of Latitude 11
degrees 17'30" South, Longitude 126 degrees 58'13" East;
i) thence north-easterly along the geodesic to the point of Latitude 11
degrees 14'24" South, Longitude 127 degrees 31'33" East;
j) thence north-easterly along the geodesic to the point of Latitude 10
degrees 55'26" South, Longitude 127 degrees 47'04" East;
k) thence north-easterly along the geodesic to the point of Latitude 10
degrees 53'42" South, Longitude 127 degrees 48'45" East;
l) thence north-easterly along the geodesic to the point of Latitude 10
degrees 43'43" South, Longitude 127 degrees 59'16" East; and
m) thence north-easterly along the geodesic to the point of commencement.
ZONE OF COOPERATION AREA C The area bounded by the line -
a) commencing at the point of Latitude 9 degrees 12'19" South, Longitude 127
degrees 33'32" East;
b) running thence south-easterly along the geodesic to the point of Latitude 9
degrees 22'53" South, Longitude 127 degrees 48'42" East;
c) thence south-westerly along the geodesic to the point of Latitude 10
degrees 06'40" South, Longitude 126 degrees 00'25" East;
d) thence north-easterly along the geodesic to the point of Latitude 9 degrees
46'01" South, Longitude 126 degrees 00'50" East; and
e) thence north-easterly along the geodesic to the point of commencement.
ANNEX B
PETROLEUM MINING CODE FOR AREA A
OF THE ZONE OF COOPERATION
PART I
DEFINITIONS
Article 1
Definitions 1. For the purposes of this Petroleum Mining Code:
(a) "block" means a block constituted in accordance with Article 2 of this
Petroleum Mining Code;
(b) "calendar year" means a period of twelve (12) months commencing on 1
January and ending on the following 31 December, according to the
Gregorian Calendar;
(c) "contract operator" means the contractor appointed and authorized by
the contractors to be responsible for petroleum operations and all
dealings with the Joint Authority under the contract on behalf of the
contractors;
(d) "contract year" means a period of twelve (12) consecutive months
according to the Gregorian Calendar counted from the effective date of
the contract or from the anniversary of such effective date;
(e) "discovery area" means the blocks declared by the Joint Authority
under Article 16 of this Petroleum Mining Code to contain petroleum;
(f) "effective date" means the date a production sharing contract is
entered into by and between the Joint Authority and the contractor;
(g) "operating costs" means those costs defined in a production sharing
contract which are incurred and are recoverable by the contract
operator in the course of undertaking petroleum operations;
(h) "petroleum pool" means a discrete accumulation of petroleum under a
single pressure system;
(i) "pipeline" means a pipe or system of pipes and associated equipment
necessary for conveying petroleum;
(j) "work program and budget of operating costs" means the details of
petroleum operations to be carried out in or related to the contract
area and the aggregate cost estimates for those operations;
(k) "Treaty" means the Treaty between Australia and the Republic of
Indonesia on the Zone of Cooperation in an Area between the Indonesian
Province of East Timor and Northern Australia to which this Petroleum
Mining Code is an Annex. 2. The terms used in this Petroleum Mining
Code shall, unless otherwise specified, have the same meaning as those
in the Treaty.
PART II
AREA A
Article 2
Graticulation of Area A 1. The surface of Area A shall be divided by the Joint
Authority into graticular sections defined by meridians of five (5) minutes of
longitude (reference the meridian of Greenwich) and by parallels of latitude
of five (5) minutes (reference the Equator). A block shall constitute a
graticular section as described above and shall include part graticular
sections. Each block in Area A shall be allocated a discrete identifying
number. 2. The Joint Authority may subdivide each block into graticular
sections. Where this is done, the graticular sections shall be defined by
meridians of longitude and by parallels of latitude, and each section shall
form a block. Each block so defined shall be allocated a discrete identifying
number. 3. Contract areas within Area A shall be described in terms of the
component blocks.
Article 3
Geodetic Datum
Whenever it is necessary to determine the position of a line in Area A that
position shall be determined by reference to a spheroid having its centre at
the centre of the earth and a major (equatorial) radius of 6378160 metres and
a flattening of 100/29825 and by reference to the position of the Johnston
Geodetic Station in the Northern Territory of Australia. That station shall be
taken to be situated at 133 degrees, 12 minutes and 30.0771 seconds of East
Longitude and at 25 degrees, 56 minutes and 54.5515 seconds of South Latitude
and to have a ground level of 571.2 metres above the spheroid referred to
above.
PART III
THE CONTRACT
Article 4
Rights Conferred by Contract 1. A production sharing contract entered into by
the Joint Authority, with the approval of the Ministerial Council, shall give
to the contractor the exclusive right and the responsibility to undertake
petroleum operations in a contract area, subject to the provisions of the
Treaty, relevant regulations and directions issued by the Joint Authority, and
the terms and conditions of the contract. 2. During each calendar year, any
petroleum production shall be shared between the Joint Authority and the
contractor. 3. The contract shall not confer on the contractor ownership of
petroleum in the ground but shall provide for the contractor to take a share
of petroleum production as payment from the Joint Authority for the petroleum
operations undertaken by the contract operator pursuant to the contract.
Ownership of the Joint Authority's share of petroleum production shall remain
with the Joint Authority. Except as provided in paragraph 5 of this Article,
the Joint Authority shall authorize the marketing of its share of petroleum
production by the contractor who shall market all petroleum produced from the
contract area. 4. Title to the contractor's portion of petroleum production
shall pass to the contractor at the point of tanker loading. Subject to
paragraph 5 of this Article the contractor shall have the right to lift,
dispose of and export its share of petroleum, and retain abroad the proceeds
obtained therefrom. Except where the Joint Authority markets petroleum as
provided in paragraph 5 of this Article, the contract shall require the
contractor to pay to the Joint Authority, at regular periods during each
calendar year, an amount of money estimated to be equal to the value of the
Joint Authority's share of petroleum production lifted for those periods. The
contract shall specify the length of each period, monthly if workable, the
means by which the value of the Joint Authority's share of petroleum
production is estimated for each period, and when each payment shall be made.
The estimated value of the Joint Authority's share of petroleum production for
each period shall be based on the work program and budget of operating costs
and revisions to it, and the expected value of quantities of petroleum to be
produced. The estimated value shall be revised during the calendar year having
regard to the actual operating costs and value of sales of petroleum. 5. The
Joint Authority, with the approval of the Ministerial Council, may market any
or all petroleum production. Where it is the Joint Authority's share of
petroleum production which is to be marketed by the Joint Authority, the
method of determining the estimated value of the Joint Authority's share shall
be based on that method described in paragraph 4 of this Article. Where
petroleum production marketed by the Joint Authority includes the contractor's
share, the contract shall require the Joint Authority to pay to the
contractor, at regular periods during each calendar year, an amount of money
estimated to be equal to the value of the contractor's share of petroleum
production so lifted for those periods. The method of determining the
estimated value of the Joint Authority's and the contractor's shares shall be
based on that method described in paragraph 4 of this Article. The contract
operator shall be obliged to coordinate the efficient lifting of the petroleum
production, including tanker nomination and scheduling. 6. The contract shall
also specify that within thirty (30) days after the end of each calendar year,
adjustments and cash settlements between the contractor and the Joint
Authority shall be made on the basis of the actual quantities, amounts and
prices involved, in order to ensure that the Joint Authority receives the
correct share of petroleum production for each calendar year. 7. In the case
of a contract entered into with a group of corporations, each corporation
shall be jointly and severally liable for meeting the conditions of the
contract, and for complying with the requirements of this Petroleum Mining
Code and the regulations and directions issued by the Joint Authority. Each
corporation shall be a signatory to the contract with the Joint Authority.
Article 5
The Contract 1. Without limiting the matters to be dealt with, the contract
shall be concluded on the basis of the Model Production Sharing Contract and
shall include:
(a) the definition of the responsibilities and rights of the contractor,
the contract operator and the Joint Authority;
(b) the term of the contract and block relinquishment provisions;
(c) the work program and expenditure commitments;
(d) the definition of operating costs and the method of recovery of those
costs by the contract operator;
(e) the petroleum production share to be allocated to the contractor;
(f) provisions for the termination of the contract;
(g) provisions for exemption from and variation of contract conditions;
(h) provisions for the resolution of disputes between the contractor and
the Joint Authority; and
(i) any other provisions that are consistent with the Treaty.
Article 6
Contract Operator 1. Where a number of corporations enters into a contract
with the Joint Authority, the corporations shall appoint and authorize one of
their number to be the contract operator responsible, on behalf of the group
of corporations, for petroleum operations and all dealings with the
Joint Authority under the contract. 2. The contract operator shall undertake
petroleum operations in an efficient manner which minimizes costs and in a
manner in accordance with the provisions of the production sharing contract.
Costs incurred by the contract operator in undertaking petroleum operations
shall not include any component of profit which accrues to the contract
operator solely by virtue of its role as contract operator. 3. All
communications on matters related to the contract shall be effected between
the contract operator and the Joint Authority. The contract operator shall
establish an office in either the Republic of Indonesia or Australia.
Article 7
Term of Contract 1. Subject to the provisions of this Article, and Articles 22
and 48 of this Petroleum Mining Code, the term of a production sharing
contract shall be thirty (30) years. In addition, the provisions of the
production sharing contract shall include:
(a) an obligation on the Joint Authority to give sympathetic consideration
to an extension of the term of the contract beyond the thirtieth
(30th) contract year if petroleum production has not ceased by that
year; and
(b) automatic extension of the term of the contract to allow continuation
of petroleum production to meet natural gas sales contracts the terms
of which extend beyond the thirtieth (30th) contract year of the
production sharing contract. 2. The production sharing contract may
also include a specified term after which the contract may be
terminated if a discovery is not made.
PART IV
PETROLEUM EXPLORATION AND EXPLOITATION
Article 8
Advertisement of Blocks 1. The Joint Authority shall invite applications to
enter into a contract over specific blocks. The invitation for applications
shall specify:
(a) the blocks over which the rights shall be granted;
(b) the bidding system to apply;
(c) the basis on which bids shall be assessed;
(d) details of the contract to be entered into including the rights and
responsibilities of the parties to the contract; and
(e) the period within which applications may be made. 2. Details of the
invitation for applications shall be published in official Australian
and Indonesian Government Gazettes and in such other ways as the
Joint Authority decides.
Article 9
Bidding System 1. The Joint Authority shall invite applications to enter into
a contract over parts of Area A using a work program bidding system which
identifies annual exploration work program and expenditure commitments to be
undertaken in the contract area. 2. The Joint Authority shall make available
full details of the bidding system to be used at the time applications are
invited.
Article 10
Application for Contracts 1. The Joint Authority shall set out in formal
guidelines the form in which applications shall be prepared and lodged. As a
minimum requirement a draft contract based on the Model Production Sharing
Contract shall be completed and lodged, and applications shall set out details
of the work program and expenditure commitments, and the financial capability
and technical knowledge and ability available to the applicant. 2. Where an
application is lodged by a group comprising several corporations, the
application shall be accompanied by evidence that an agreement can be reached
between those corporations for cooperation in petroleum operations in the
contract area. 3. The application shall be accompanied by the fee specified in
Article 44 of this Petroleum Mining Code.
Article 11
Consideration of Application 1. The Joint Authority shall set out in formal
guidelines the basis on which applications will be considered and the relevant
criteria which applicants will be expected to meet. Contracts shall be offered
in accordance with the published criteria for that bidding round. The
principal criteria shall be the amount and quality of the exploration work
bid. 2. The Joint Authority shall be satisfied that an applicant has the
necessary financial capability and technical knowledge and ability to carry
out petroleum operations in a manner consistent with the terms and conditions
of the contract and this Petroleum Mining Code, including the necessary
environmental and safety requirements.
Article 12
Grant or Refusal of Contracts 1. The Joint Authority shall seek prior approval
from the Ministerial Council to enter into a contract with the preferred
applicant or group of applicants. 2. Subject to that approval, the
Joint Authority shall notify in writing the successful applicant that it has
Ministerial Council approval to enter into a contract with the applicant
covering petroleum operations in a specified contract area on terms and
conditions set out in the contract. The applicant shall have thirty (30) days
within which to accept or refuse the offer in writing. On the applicant
accepting the offer, paying the contract service fee, and providing evidence
that it has fulfilled any prerequisite conditions such as insurance cover, the
Joint Authority shall enter into the contract with the applicant. 3.
Unsuccessful applicants shall be advised accordingly.
Article 13
Publication of Contracts
The Joint Authority shall publish in official Australian and Indonesian
Government Gazettes summary details of:
(a) contracts entered into; and
(b) termination of contracts.
Article 14
Commencement of Work
The contract operator shall commence petroleum operations within six (6)
months from the date the contract is entered into, except for reasons of force
majeure.
Article 15
Discovery of Petroleum 1. The contract operator shall notify the
Joint Authority in writing within twenty four (24) hours whenever any
petroleum is discovered and on request by the Joint Authority shall provide
details in writing of the:
(a) chemcial composition and physical properties of the petroleum; and
(b) the nature of the sub-soil in which the petroleum occurs. 2. The
contract operator shall provide the Joint Authority with any other
information concerning the discovery on request by the
Joint Authority. 3. The contract operator shall also do such things as
the Joint Authority requests to determine the chemical composition and
physical properties of any petroleum discovered, and to determine the
geographical extent of any petroleum pool and the quantity of
petroleum in that pool.
Article 16
Declaration of Discovery Area 1. The Joint Authority shall declare the blocks
within the contract area covering a petroleum pool as a discovery area,
provided that the joint Authority and contract operator agree that the
petroleum pool can be produced commercially. These blocks shall form a single
contiguous area. 2. At any time after a discovery area has been declared, the
Joint Authority may, of its own volition or on request from the contract
operator, agree that certain blocks be included in or excluded from the
discovery area. Blocks included in the discovery area in this way shall be
from within the contractor's contract area.
Article 17
Approval to Produce Petroleum
The contract operator shall not construct any production structures without
the approval of the Joint Authority. The Joint Authority shall not
unreasonably withhold approvals.
Article 18
Approval to Construct Pipeline 1. The contract operator shall not construct a
pipeline for the purpose of conveying petroleum within or from Area A without
the approval of the Joint Authority, nor shall the contract operator operate
or remove that pipeline without the approval of the Joint Authority. 2. The
Joint Authority may direct a contract operator owning a pipeline to enter into
a commercial agreement with another contract operator to enable the second
mentioned operator to transport petroleum.
Article 19
Petroleum Production Work
Unless otherwise agreed between the contract operator and the Joint Authority,
work on a permanent structure to produce petroleum shall commence within six
(6) months of approval to construct the structure.
Article 20
Rates of Production
The Joint Authority may direct and make regulations about the commencement of
petroleum production and the specific rates of petroleum production. In giving
such directions and making such regulations the Joint Authority shall take
account of good oilfield practice.
Article 21
Unitization
Where a petroleum pool is partly within a contract area and partly within
another contract area, but wholly within Area A, the Joint Authority shall
require the contractors to enter into a unitization agreement with each other
within a reasonable time, as determined by the Joint Authority, for the
purpose of securing the more effective and optimized production of petroleum
from the pool. If no agreement has been reached within such reasonable time,
the Joint Authority shall decide on the unitization agreement. Without
limiting the matters to be dealt with, the unitization agreement shall define
or contain the approach to define the amount of petroleum in each contract
area, the method of producing the petroleum, and shall appoint the contract
operator responsible for production of the petroleum covered by the
unitization agreement. The Joint Authority shall approve the unitization
agreement before approvals under Article 17 of this Petroleum Mining Code are
given. Any changes to the unitization agreement shall be subject to approval
by the Joint Authority.
Article 22
Block Relinquishment 1. The contract shall contain provisions for the
progressive relinquishment of blocks from the contract area. 2. In calculating
the relinquishment requirements, the blocks in a discovery area shall not be
counted as part of the original number of blocks in the contract area. 3. In
the event that no discovery area has been declared in the contract area before
the end of an initial period specified in the contract, the contract operator
shall either relinquish all remaining blocks in the contract area and the
contract shall be terminated, or the contract operator shall exercise the
option provided in the contract to extend the term of the contract.
Article 23
Surrender of Blocks 1. The contractor may surrender some or all of the blocks
in a contract area provided the conditions of the contract have been met to
the satisfaction of the Joint Authority. Blocks surrendered in this way shall
be credited towards the block relinquishment requirement in Article 22 of this
Petroleum Mining Code. 2. Before agreeing to an application to surrender some
or all of the blocks in a contract area, the Joint Authority may direct the
contract operator to clean up the contract area or remove structures,
equipment and other property from the contract area and the contract operator
shall comply with that direction.
PART V
GENERAL ARRANGEMENTS
Article 24
Work Practices
It shall be the responsibility of the contract operator to ensure that
petroleum operations are carried out in a proper and workmanlike manner and in
accordance with good oilfield practice. The contract operator shall take the
necessary action to:
(a) protect the environment in and about the contract area; and
(b) secure the safety, health and welfare of persons engaged in petroleum
operations in or about the contract area.
Article 25
Insurance 1. The Joint Authority shall require the contractor to take out and
maintain from the effective date of the contract, to the satisfaction of the
Joint Authority, insurance on a strict liability basis and for an amount
determined by the Joint Authority in consultation with applicants for
contracts. It shall also agree with the contractor on a mechanism whereby
compensation claims can be determined. The insurance shall cover expenses or
liabilities or any other specified things arising in connection with the
carrying out of petroleum operations and other activities associated with
those operations in the contract area, including expenses associated with the
prevention and clean-up of the escape of petroleum. 2. The contract operator
shall ensure that transportation of petroleum in bulk as cargo from Area A
only takes place in tankers with appropriate insurance commensurate with
relevant international agreements.
Article 26
Maintenance of Property
The contract operator shall be responsible for maintaining in safe and good
condition and repair all structures, equipment and other property in the
contract area.
Article 27
Removal of Property 1. As directed by the Joint Authority, the contract
operator shall remove all property brought into the contract area and comply
with regulations and directions concerning the containment and clean-up of
pollution. 2. In the event that the contract operator does not remove property
or pollution to the satisfaction of the Joint Authority or take such other
action as is necessary for the conservation and protection of the marine
environment in that contract area, the Joint Authority may direct the contract
operator to take such remedial action as the Joint Authority deems necessary.
If the contract operator does not comply with that direction, the contractor
shall be liable for any costs incurred by the Joint Authority in rectifying
the matter.
Article 28
Exemption from or Variation of Conditions 1. The Joint Authority may agree to
exempt the contractor from complying with the conditions of the contract. The
Joint Authority may also agree to vary those conditions. 2. The
Joint Authority shall not exempt the contractor from or vary the following
conditions of a contract without prior approval of the Ministerial Council:
(a) the Joint Authority's or the contractor's production shares;
(b) the operating cost recovery provisions;
(c) the term of the contract;
(d) the block relinquishment provisions; and
(e) the annual contract service fee.
Article 29
Provision of Information 1. The Joint Authority may direct the contractor to
provide the Joint Authority with data, documents or information relating to
petroleum operations including but not limited to routine production and
financial reports, technical reports and studies relating to petroleum
operations. 2. The Joint Authority may require the contractor to provide that
information in writing within a specified period. The Joint Authority shall
have title to all data obtained from the petroleum operations. 3. A contractor
shall not be excused from furnishing information on the grounds that the
information might tend to incriminate the contractor but the information shall
not be admissible in evidence against the contractor in criminal proceedings.
Article 30
Safety Zones 1. The Joint Authority may declare a safety zone around any
specified structure in Area A, and may require the contract operator to
install, maintain or provide thereon, navigation, fog and illumination
lighting, acoustic and other devices and equipment necessary for the safety of
the petroleum operations. A safety zone may extend up to five hundred (500)
metres from the extremities of the structure. Unauthorized vessels shall be
prohibited from entering the safety zone. 2. Additionally, a restricted zone
of one thousand two hundred and fifty (1250) metres may be declared around the
extremities of safety zones and pipelines in which area unauthorized vessels
employed in exploration for and exploitation of petroleum resources are
prohibited from laying anchor or manoeuvring.
Article 31
Records to be Kept
The Joint Authority shall require the contractor to keep accounts, records or
other documents, including financial records, in connection with petroleum
operations and to furnish the Joint Authority in a specified manner data,
reports, returns or other documents in connection with those activities. These
arrangements shall also apply to cores, cuttings and samples taken in
connection with petroleum operations in the contract area.
Article 32
Prospecting Approval
The Joint Authority may issue a prospecting approval to any person to carry
out petroleum exploration activities in blocks not in contract areas. The
prospecting approval shall specify those conditions to which the person shall
be subject. The conditions of a prospecting approval shall not include any
preference for or rights to enter into a contract over those blocks. All data
and reports resulting from such activities shall be submitted to the Joint
Authority for its own free use.
Article 33
Access Approval 1. In order to promote the optimum exploration for and
exploitation of petroleum resources in Area A, the Joint Authority may give
approval to a contract operator, and persons holding prospecting approvals or
undertaking marine scientific research, to enter a contract area, not being
its contract area, to carry out activities in accordance with that approval.
The Joint Authority shall consult with the contract operator of the contract
area into which access is sought before giving approval. The terms and
conditions of approval shall include an obligation to furnish to the
Joint Authority in a specified manner data, reports, returns or other
documents in connection with activities carried out under the access approval
and a prohibition on the drilling of exploration wells. 2. The Joint Authority
may also give approval to a contract operator to lay and fix petroleum
production facilities on the seabed in a contract area not being its contract
area, provided that such activities do not interfere with the petroleum
operations in the first contract area.
Article 34
Inspectors 1. The Joint Authority may appoint a person to be an inspector for
the purposes of this Petroleum Mining Code, the regulations and directions
issued under Article 37 of this Petroleum Mining Code, and contract terms and
conditions applying to petroleum operations in Area A. A person so appointed
shall, at all reasonable times and on production of a certificate of
appointment:
(a) have the right to enter any structure, vessel or aircraft in Area A
being used for petroleum operations;
(b) have the right to inspect and test any equipment being used or
proposed to be used for petroleum operations; and
(c) have the right to enter any structure, vessel, aircraft or building in
which it is thought there are any documents relating to petroleum
operations in Area A and may inspect, take extracts from and make
copies of any of those documents. 2. The contractor shall provide an
inspector with all reasonable facilities and assistance that the
inspector requests for the effective exercise of the inspector's
powers.
Article 35
Service of Notices 1. A document to be served on a person other than the
Joint Authority or a corporation shall be served:
(a) by delivering the document to that person;
(b) by posting the document as a letter addressed to that person;
(c) by delivering the document to that address and leaving the document
with a person apparently in the service of that person;
(d) by sending the document in the form of a telex or facsimile to that
person's telex or facsimile number, as appropriate; or
(e) by sending the document as a telegram addressed to that person. 2. A
document to be served on a corporation shall be served by complying
with sub-paragraphs (b), (c), (d) or (e) or paragraph 1 of this
Article. 3. A document to be served on the Joint Authority shall be
served by leaving it with a person apparently employed in connection
with the Joint Authority, at a place of business of the
Joint Authority specified in the contract or by posting the document
as a letter or telegram addressed to the Joint Authority at that place
of business or by sending the document as a telex or facsimile to the
Joint Authority's telex or facsimile number. 4. Where a document is
posted as a letter, service shall be deemed to have been effected
within seven (7) days of the letter having been posted, unless the
contrary is proved.
Article 36
Release of Information and Data 1. The Joint Authority may make such use as it
wishes of information and data contained in a report, return or other document
furnished to the Joint Authority, provided that information and data is not
made publicly known before the periods of confidentiality identified below
have expired. 2. Basic information and data about petroleum operations in a
contract area may be released two (2) years after it was lodged with the
Joint Authority or when the blocks to which that information and data relates
cease to be part of the contract area, if earlier. However, conclusions drawn
or opinions based in whole or in part on that information and data shall not
be released until five (5) years after that information and data was lodged
with the Joint Authority. 3. Information and data relating to a seismic or
other geochemical or geophysical survey shall be deemed to have been lodged no
later than six (6) months after the survey was essentially completed.
Information and data on wells shall be deemed to have been lodged no later
than three (3) months after the well was essentially completed. 4.
Notwithstanding paragraph 2 of this Article, the contract operator shall have
the right to have access to and use all information held by the
Joint Authority relating to the blocks in Area A adjacent to its contract
area. Where information and data has been released by the person or some party
acting on the person's behalf, the Joint Authority shall not be obliged to
maintain the confidentiality of that information and data. 5. The
Joint Authority shall be free to use any information and data relating to
relinquished, surrendered and other blocks outside the contract area,
including releasing it to any party. 6. Contractors shall not use such
information and data outside Australia or the Republic of Indonesia without
the approval of the Joint Authority. 7. Officials of the Australian and
Indonesian Governments may have access to information and data provided to the
Joint Authority under this Petroleum Mining Code, provided such officials
comply with the provisions of this Article.
Article 37
Regulations and Directions 1. The Joint Authority shall issue regulations and
directions to apply to persons, consistent with the Treaty including this
Petroleum Mining Code, in order to carry out its functions. In particular, the
regulations and directions shall deal with, but are not limited to, the
following matters:
(a) the exploration for petroleum and the carrying on of operations, and
the execution of works, for that purpose;
(b) the production of petroleum and the carrying on of operations, and the
execution of works, for that purpose;
(c) the measurement and the sale or disposal of the Joint Authority's and
the contractor's petroleum production, and the carrying on of
operations for that purpose, including procedures for transfer of
title to petroleum and measurement and verification of petroleum so
transferred;
(d) the conservation, and prevention of the waste of, the natural
resources, whether petroleum or otherwise;
(e) the construction, erection, maintenance, operation, use, inspection
and certification and re-certification of structures, pipelines or
equipment;
(f) the control of the flow or discharge, and the prevention of the
escape, of petroleum, water or drilling fluid, or a mixture of water
or drilling fluid with petroleum or any other matter;
(g) the clean-up or other remedying of the effects of the escape of
petroleum;
(h) the prevention of damage to petroleum-bearing strata;
(i) the prevention of the waste or escape of petroleum;
(j) the removal from a contract area of structures, equipment and other
property brought into the contract area for or in connection with
petroleum operations;
(k) the carrying on of petroleum operations in a safe and environmentally
sound manner;
(l) the preparation of assessments of the impact of petroleum operations
on the environment;
(m) the authorization by the Joint Authority of entry into Area A by the
employees of contractors and the employees of their sub-contractors;
and
(n) the control of movement into, within and out of Area A of vessels,
aircraft, structures and equipment employed in petroleum operations.
2. The Joint Authority may, by instrument in writing served on a
person or class of persons, make a regulation or direction on a matter
consistent with the above to apply specifically to that person or
class of persons.
Article 38
Register of Contractors
The Joint Authority shall maintain a register setting out summary details of:
(a) areas over which contracts are in force;
(b) the contract operator and the contractor for each contract area;
(c) work and expenditure commitments relating to the contract area;
(d) changes to contract conditions, the contract operator and the
undivided participating interest of the contractor in a contract area;
(e) blocks relinquished or surrendered from contract areas;
(f) changes in names and addresses of the contract operator and the
contractor; and
(g) unitization agreements.
Article 39
Approval of Contractors
Corporations wishing to hold an undivided participating interest which would
result in changes to the contractor or the contract operator in a contract
area shall be required to obtain the Joint Authority's approval of those
changes. The Joint Authority shall note such approval in the register. Until
such approval is given by the Joint Authority, with the prior consent of the
Ministerial Council, the new participating interest holders' agreement shall
not be recognized by the Joint Authority, and the contractor's and contract
operator's liabilities under a contract shall remain unchanged.
Article 40
Inspection of Register
The Joint Authority shall ensure the register is available for inspection by
any person at all convenient times.
Article 41
Auditing of Contractor's Books and Accounts
The contractor's books and accounts shall be subject to audit by the
Joint Authority, which shall be conducted annually. The Joint Authority may
issue regulations and directions with respect to the auditing of books and
accounts.
Article 42
Security of Structures 1. Operators of vessels, drilling rigs and structures
in Area A shall be responsible for controlling access to their facilities;
providing adequate surveillance of safety zones and their approaches; and
establishing communications with, and arranging action by, the appropriate
authorities in the event of an accident or incident involving threat to life
or security. 2. To assist operators in meeting these responsibilities, the
Joint Authority shall appoint persons, to be stationed at the office of the
Technical Directorate of the Joint Authority, responsible for liaising with
appropriate Australian and Indonesian authorities.
Article 43
Amendment of Petroleum Mining Code
Except in the case of amendments to Part VI of this Petroleum Mining Code,
where the provisions of this Petroleum Mining Code are amended, to the extent
that the amendments are not consistent with the provisions of contracts in
force prior to the amendments, those amendments may only apply to such
contracts by agreement between the contract operator and the Joint Authority.
PART VI
FEES
Article 44
Application Fees 1. The fee to be lodged with applications for production
sharing contracts is US$ three thousand (3000). 2. The fee to be lodged with
applications for a prospecting approval is US$ five hundred (500). 3.
Application fees shall not be refunded to unsuccessful applicants.
Article 45
Contract Service Fee 1. At the beginning of each contract year, the contract
operator shall pay to the Joint Authority a contract service fee of US$ fifty
thousand (50,000). 2. In addition, if one or more discovery areas have been
declared in the contract area, the contract operator shall pay to the
Joint Authority at the beginning of the contract year a service fee of:
(a) US$ twenty thousand (20,000) for the first discovery area; and
(b) US$ ten thousand (10,000) for each additional discovery area within
the contract area. 3. Where more than one production structure is
installed in a discovery area in the contract area, the contract
operator shall pay to the Joint Authority at the beginning of the
contract year an additional service fee of US$ ten thousand (10,000).
Article 46
Registration Fees
For the approval and registration of agreements between corporations which
result in changes to the undivided participating interests of the contractor
in a contract area, a fee of US$ five hundred (500) shall be payable.
Article 47
Amendment of Fees
With the approval of the Ministerial Council, the Joint Authority may change
the fees specified in this Part to reflect any changes in the costs of
administration. Those changes in fees shall not be made more frequently than
once a year and shall not be applied retrospectively.
PART VII
PENAL PROVISIONS
Article 48 Termination of Contracts 1. Where the contractor has not complied
with the provisions of this Petroleum Mining Code, the regulations and
directions issued by the Joint Authority, or the terms of the contract the
Joint Authority may recommend to the Ministerial Council that the contract be
terminated. The Joint Authority shall give thirty (30) days written notice to
the contractor of the Joint Authority's intention to recommend termination of
the contract. 2. The Ministerial Council shall not agree to the termination of
the contract until the contractor has had an apportunity to provide the
Joint Authority with reasons why the contract should not be terminated, and
the Joint Authority has given full consideration to those reasons. The
contractor must provide reasons for non-termination within thirty (30) days of
receipt of notice of the Joint Authority's intention to terminate. 3.
Notwithstanding the termination of a contract, the contractor shall remain
liable to take such action as is necessary to clean-up the contract area and
remove all property brought into that area. The contractor shall remain liable
to the Joint Authority to pay any outstanding debts due to the Authority.
ANNEX C
MODEL PRODUCTION SHARING CONTRACT
BETWEEN THE JOINT AUTHORITY AND (CONTRACTORS) This production sharing
contract, which has been approved by the Ministerial Council established under
the Treaty between Australia and the Republic of Indonesia on the Zone of
Cooperation in an Area between the Indonesian Province of East Timor and
Northern Australia (hereinafter called
the Treaty), is made and entered into on this day of ,
19 by and between the Joint Authority established under
the Treaty and , (a) corporation(s) organized and
existing underthe law of hereinafter called the
"contractor", both hereinafter sometimes referred to either individually as
the "Party" or collectively as the "Parties". WITNESSETH WHEREAS, petroleum
existing within Area A of the Zone of Cooperation established by the Treaty is
a resource to be exploited jointly by the Contracting States; WHEREAS, the
Joint Authority, with the approval of the Ministerial Council, has an
exclusive authority to contract for petroleum operations in and throughout the
area described in Appendix A of this Contract and outlined on the map which is
Appendix B of this contract, which area is hereinafter referred to as the
"contract area"; WHEREAS, the Joint Authority wishes to promote petroleum
operations in the contract area and the contractor desires to join and assist
the Joint Authority in accelerating the exploration and development of the
potential petroleum resources within the contract area; WHEREAS, the
contractor has the necessary financial capability, and technical knowledge and
ability to carry out the petroleum operations hereinafter described; WHEREAS,
in accordance with the Treaty, including the Petroleum Mining Code set out in
Annex B of the Treaty, a cooperative agreement in the form of a production
sharing contract may be entered into between the Joint Authority and
corporations for the purpose of petroleum operations; and NOW, therefore, in
consideration of the mutual covenants herein contained, it is agreed as
follows:
SECTION 1
SCOPE AND DEFINITIONS SCOPE 1.1. This contract is a production sharing
contract subject to the Treaty, including the Petroleum Mining Code. The
Joint Authority shall be responsible for the management of the operations
contemplated hereunder in accordance with its management functions defined
under the Treaty, including the Petroleum Mining Code. The contractor appoints
and authorizes (name of corporation to be the contract operator), being one of
the contracting corporations, to be the contract operator who, on behalf of
the contractor, shall be responsible to the Joint Authority for the execution
of petroleum operations in accordance with the provisions of this contract,
and is hereby appointed and constituted as the exclusive corporation to
conduct petroleum operations. The contractor shall provide all human,
financial and technical resources required for the performance of petroleum
operations authorized by the contract, and shall therefore have an economic
interest in the development of the petroleum pools in the contract area and be
entitled to share in petroleum produced from the contract area in accordance
with the provisions of Section 7 of this contract. 1.2. Except for
expenditures on capital costs for the development of petroleum pools, the
contractor shall not incur interest expenses to finance petroleum operations.
DEFINITIONS 1.3. Words and terms used in this contract shall have the same
meaning as those defined in the Treaty, including the Petroleum Mining Code
set out in Annex B to the Treaty, except where a new definition is expressly
provided for in this contract.
(a) "Affiliated corporation or affiliate" means a corporation or other
entity that controls, or is controlled by, a Party to this contract,
it being understood that control shall mean ownership by one
corporation or entity of at least fifty (50) per cent of:
(i) the voting stock, if the other corporation is a corporation issuing
stock; or
(ii) the controlling rights or interests, if the other entity is not a
corporation.
(b) "Barrell" means a quantity or unit of oil, having a volume of
forty-two (42) United States gallons at the temperature of sixty (60)
degrees Fahrenheit.
(c) "Contract area" means the area not relinquished or surrendered,
constituted by the blocks which are the subject of this contract and
which are specified in Appendices A and B of this contract.
(d) "Crude oil" means crude mineral oil and all liquid hydrocarbons in
their natural state or obtained from natural gas by condensation or
extraction.
(e) "Development plan" means a description of the proposed petroleum
reservoir development and management program, details of the
production facilities, the production profile for the expected life of
the project, the estimated capital and non-capital expenditure
covering the feasibility, fabrication, installation and pre-production
stages of the project, and an evaluation of the commerciality of the
development of the petroleum from within a discovery area.
(f) "Exploration and appraisal strategy" means a brief description of the
exploration/geological play concepts for, the extent to which the
leads and prospects are identified in, and the data reviews, seismic
surveys and exploration wells planned for the contract area.
(g) "First tranche petroleum" means the quantity of petroleum production
defined in subsection 9 of Section 7.
(h) "Force majeure" means circumstances beyond the control and without the
fault or negligence of the contract operator and the Joint Authority
including but not restricted to acts of God or the public enemy,
perils of navigation, fire, hostilities, war (declared or undeclared),
blockade, labor disturbances, strikes, riots, insurrections, civil
commotion, quarantine restrictions, epidemics, storms, earthquakes, or
accidents.
(i) "Natural gas" means all gaseous hydrocarbons, including wet mineral
gas, dry mineral gas, casinghead gas and residue gas remaining after
the extraction of liquid hydrocarbons from wet gas.
SECTION 2
TERM OF THIS CONTRACT 2.1. Subject to the provisions of this Section and
Section 13 , the term of this contract shall be thirty (30) years as from the
effective date. 2.2. If at the end of the initial six (6) years as from the
effective date, no petroleum is discovered in commercial quantities in the
contract area, the contractor shall have the option either to terminate this
contract or to request the Joint Authority, by means of a sixty (60) days
written notice prior to the end of the initial six (6) years, to extend this
contract to the end of the tenth year from the effective date. Where a
discovery is made but has not been appraised before the end of the tenth
contract year, the Joint Authority shall extend the term of this contract so
as to allow completion of an expeditious appraisal of the discovery, or if
necessary in the case of a natural gas discovery, until marketing arrangements
and sales contracts are completed. The extension shall be promptly granted,
without prejudice to the provisions of Section 13 of this contract relating to
termination, provided a work program and expenditures are agreed in accordance
with subsection 3 of Section 4 of this contract. 2.3. If, at the end of the
term of this contract as extended under subsection 2 of this Section, no
petroleum is discovered in commercial quantities in the contract area, this
contract shall automatically terminate in its entirety. 2.4. If petroleum is
discovered in any block or blocks of the contract area within the initial six
(6) year period or any extension pursuant to subsection 2 of this Section,
which the Joint Authority and the contract operator agree can be produced
commercially, based on the consideration of all pertinent operating and
financial data, then as to that particular block or blocks of the contract
area the Joint Authority shall declare a discovery area and the contract
operator shall commence development. In other blocks in the contract area, the
contract operator shall continue exploration without prejudice to the
provisions of Section 3 regarding the relinquishment of blocks. 2.5. If
petroleum production has not ceased permanently in and from the contract area
by the end of the thirtieth contract year, the Joint Authority shall give
sympathetic consideration to extending the term of this contract beyond the
thirtieth contract year until production ceases permanently. In the case of a
natural gas project, the contract term shall be automatically extended to the
end of the term of the natural gas sales contract. 2.6. If petroleum
production has ceased permanently in and from the contract area before the end
of the thirtieth contract year, then this contract shall be terminated upon
the permanent cessation of production.
SECTION 3
RELINQUISHMENT OF BLOCKS 3.1. On or before the end of the third contract year
as from the effective date, the contract operator shall relinquish twenty-five
(25) per cent of the blocks in the original contract area. 3.2. On or before
the end of the sixth contract year the contract operator shall relinquish an
additional twenty-five (25) per cent of the blocks in the original total
contract area. 3.3. Subject to the provisions of Section 2 of this contract,
on or before the end of the tenth contract year, the contract operator shall
relinquish all of the blocks in the contract area not contained in discovery
areas. 3.4. The contract operator's obligation to relinquish parts of the
contract area under the preceding provisions shall not apply to any blocks in
the contract area declared as a discovery area. In this respect, in
calculating the percentages under subsections 1 and 2 of this Section, blocks
in discovery areas shall be excluded from the original contract area. 3.5.
Upon thirty (30) days written notice to the Joint Authority prior to the end
of any contract year, the contract operator shall have the right to surrender
some, but not all, of the blocks in the contract area, provided the conditions
of the contract have been met to the satisfaction of the Joint Authority and
such blocks shall then be credited against the blocks in the contract area
which the contract operator is next required to relinquish under the
provisions of subsections 1, 2 and 3 of this Section. 3.6. The contract
operator shall advise the Joint Authority in advance of the date of
relinquishment of the blocks to be relinquished. For the purpose of
relinquishments, the contract operator and the Joint Authority shall consult
with each other regarding which blocks are to be relinquished. So far as is
reasonable, such blocks shall form an area of sufficient size and convenient
shape to enable petroleum operations to be conducted thereon. 3.7. For the
purposes of calculating the number of blocks to be relinquished under
subsections 1 and 2 of this Section, where the number of blocks is not exactly
divisible by four (4), only the whole number of blocks after the division by
four (4) shall be relinquished.
SECTION 4
WORK PROGRAM AND EXPENDITURES 4.1. The contract operator shall commence
petroleum operations not later than six (6) months after the effective date.
4.2. The amount of exploration work to be undertaken by the contract operator
pursuant to the terms of this contract during the first six (6) years
following the effective date shall, unless otherwise approved by the
Joint Authority, be at least that specified for each of these six (6) years as
follows:
Data Seismic Wells Expenditure
Review Surveys
US$ Kms No. US$
First Contract Year Second Contract Year Third Contract Year Fourth Contract
Year Fifth Contract Year Sixth Contract Year 4.3. If the contract is still in
force after the sixth contract year, the Joint Authority and the contact
operator shall agree to an exploration work program and expenditures for those
subsequent contract years. 4.4. The Joint Authority and the contract operator
may negotiate a change to the exploration work program and expenditures
covering contract years four (4) to ten (10), provided the changes are made at
least three (3) months prior to the beginning of the contract year affected by
the changes. 4.5. If during:
(a) the first three (3) contract years the contract operator completes
less than the amount of exploration work required to be completed
during those years, the Joint Authority shall terminate the contract;
(b) any of the contract years four (4) to ten (10) the contract operator
completes less than the amount of exploration work required within
that year, the Joint Authority may terminate the contract and, if the
contract is not terminated, the Joint Authority shall require the
completion of that work in the following contract year; or
(c) any contract year the contract operator completes more than the amount
of exploration work required to be completed by the end of that year,
the excess shall be counted towards meeting the exploration work
obligations of the contract operator during succeeding contract years.
4.6. For the purpose of subsection 5 of this Section, the
Joint Authority, in determining whether the contract operator has
completed the exploration work required to be completed in the first
three (3) contract years, and in later contract years if work
commitments are specified, shall have regard to the actual physical
work completed, and not the estimates of expenditure. Where work
commitments are not specified, the Joint Authority shall have regard
to the estimates of expenditure. 4.7. At least two (2) months prior to
the beginning of each calendar year, the contract operator shall
prepare and submit, for approval by the Joint Authority, an
exploration and appraisal strategy to be adopted for the ensuing
contract year for the contract area. 4.8. At least one (1) month prior
to the beginning of each calendar year, the contract operator shall
prepare and sumit, for approval by the Joint Authority, a work program
and budget of operating costs to be carried out during the ensuing
calendar year for the contract area. 4.9. Before work can commence on
the development of a petroleum discovery, the contract operator shall
prepare and submit, for approval by the Joint Authority, a development
plan. 4.10. Should the Joint Authority wish to propose a revision to
specified aspects of the work program and budget of operating costs,
the Joint Authority shall specify its reasons for requesting those
changes but shall not require the contract operator to undertake more
petroleum operations than the minimum work program and expenditure
commitments specified in this contract. The Parties shall reach
agreement on any changes before they become effective. 4.11. It is
recognized by the Joint Authority that the details of the work program
and budget of operating costs, and the development plan may require
changes in the light of existing circumstances and nothing herein
contained shall limit the rights of the contract operator to make such
changes, provided they do not change the general objective, quantity
and quality of the petroleum operations. 4.12. The Joint Authority
shall ensure that every effort is made to avoid delays in approving
the exploration and appraisal strategy, the work program and budget of
operating costs, and the development plan.
SECTION 5
RIGHTS AND OBLIGATIONS OF THE
PARTIES 5.1. The contract operator shall have the rights accorded to it under
the Treaty, including the Petroleum Mining Code and the Taxation Code, and in
particular shall:
(a) subject to paragraph (k) of subsection 2 of this Section, have the
right to enter and leave the contract area and move to and from the
contract operator's facilities wherever located at all times;
(b) have the right to have access to and use all geological, geophysical,
drilling, well (including well location maps), production and other
information held by the Joint Authority relating to the contract area;
and
(c) in accordance with the provisions of the Petroleum Mining Code, have
the right to have access to and use all geological, geophysical,
drilling, well, production and other information now or in the future
held by the Joint Authority relating to the blocks in Area A adjacent
to the contract area. 5.2. The contract operator shall comply with all
of the obligations imposed on it by the Treaty, including the
Petroleum Mining Code and the Taxation Code, and the regulations and
directions issued under the Petroleum Mining Code and, in particular,
shall:
(a) provide all human, financial and technical resources required for the
performance of the petroleum operations;
(b) carry out petroleum operations in a proper and workmanlike manner and
in accordance with good oilfield practice;
(c) take the necessary precautions to avoid interference with navigation
and fishing;
(d) develop an environmental management plan to be approved by the
Joint Authority, prevent pollution of the marine environment, and pay
for the costs associated with clean-up of any pollution from any
petroleum operations within the contract area;
(e) upon the termination of this contract, clean-up the contract area and
remove all structures, equipment and other property brought into the
contract area;
(f) submit to the Joint Authority copies of all original geological,
geophysical, drilling, well, production and other data (including
cores, cuttings an samples taken in connection with petroleum
operations in the contract area) and reports compiled during the term
of this contract;
(g) appoint and authorize a person to represent the contract operator and
communicate with the Joint Authority, and that person shall have an
office in either Jakarta or Darwin or both;
(h) give preference to goods and services which are produced in Australia
or the Republic of Indonesia, or provided by subcontractors operating
out of Australia or the Republic of Indonesia, provided they are
offered on competitive terms and conditions compared with those
available from other countries;
(i) give preference to the employment of Indonesian and Australian
nationals and permanent residents, and employ them in equivalent
numbers over the term of this contract, having due regard to safe and
efficient operations and good oilfield practice;
(j) take out and maintain, to the Joint Authority's satisfaction, from the
effective date of this contract,
insurance cover to the value of US$ in accordance with
Article 25 of the Petroleum Mining Code;
(k) except as otherwise approved by the Joint Authority, ensure that all
persons, equipment and goods do not enter structures in the contract
area without first entering Australia or the Republic of Indonesia,
and notify the Joint Authority of all persons, vessels, aircraft and
structures entering or leaving the contract area, and of movements
within the contract area; and
(l) make secure and safe all structures in the contract area, including
the installation of warning lights, radar and other appropriate
equipment. 5.3. The contractor shall have the rights accorded under
the Treaty, including the Petroleum Mining Code and the Taxation Code,
and in particular shall:
(a) have the right to appoint a new contract operator subject to prior
approval by the Joint Authority;
(b) have the right to transfer all or part of its undivided participating
interest in this contract to any affiliated corporation or any other
corporation with the approval of the Joint Authority. Such approval
shall not be unreasonably withheld provided the corporation taking up
those rights and obligations under this contract has, in the opinion
of the Joint Authority, the necessary financial capability and
technical knowledge and ability, in accordance with Article 11 of the
Petroleum Mining Code;
(c) have the right during the term of this contract to lift, dispose of
and export its share of petroleum production, subject to Section 7 of
this contract, and retain abroad the proceeds obtained therefrom; and
(d) have the right to retain ownership and control of all property
purchased or leased for the purposes of complying with the conditions
of this contract, and be entitled to freely remove the same from the
contract area, Australia or the Republic of Indonesia provided the
conditions of this contract have been met. 5.4. The contractor shall
comply with all of the obligations imposed on it by the Treaty,
including the Petroleum Mining Code and the Taxation Code, and the
regulations and directions issued under the Petroleum Mining Code and,
in particular, shall:
(a) be jointly and severally liable to meet the obligations imposed on the
contract operator; and
(b) be subject to the taxation law of the Contracting States, in
accordance with Article 29 of the Treaty. 5.5. The Joint Authority
shall comply with all of the obligations imposed on it by the Treaty,
including the Petroleum Mining Code and, in particular, shall be
responsible for the management of the petroleum operations
contemplated hereunder having regard to the contract operator's
responsibilities for undertaking the petroleum operations.
SECTION 6
OPERATING COSTS
GENERAL PROVISIONS 6.1. The accounting procedures in this Section shall be
followed and observed in the performance of the contractor's obligations under
the contract. 6.2. The contractor's books and accounts shall be prepared and
maintained in accordance with a generally accepted and recognized accounting
system consistent with modern petroleum industry practices and procedures.
Books and accounts shall be available for the use of the Joint Authority in
order that it may carry out its auditing responsibilities under this contract.
6.3. "Operating costs" means the sum of the following costs incurred in
petroleum operations undertaken before or at the point of tanker loading:
(a) current calendar year exploration costs;
(b) current calendar year non-capital costs;
(c) current calendar year depreciation of capital costs; and
(d) allowable operating costs incurred in previous calendar years which
have not been recovered in accordance with subsection 2 of Section 7
of this contract; less
(e) miscellaneous receipts as defined in subsection 8 of this Section.
6.4. All calculations required to determine operating costs shall be
done in United States dollars. Where costs are denoted in any other
currency, they shall be translated into United States dollars at the
exchange rate set, on the day the cost was incurred, by a bank
designated by the Joint Authority. EXPLORATION COSTS 6.5. "Exploration
costs" means those operating costs incurred which relate directly to
the current calendar year's exploration operations in the contract
area and include but are not limited to the following:
(a) costs of exploratory and appraisal drilling in the contract area
including labor, materials and services used in the drilling of wells
with the object of finding unproven reservoirs of petroleum;
(b) costs of surveys in the contract area including labor, materials and
services (including desk studies and analysis of survey data) used in
aerial, geological, geochemical, geophysical and seismic surveys, and
core hole drilling; and
(c) costs of other exploration directly related to petroleum operations in
the contract area, including the cost of auxiliary or temporary
facilities used in exploration. NON-CAPITAL COSTS 6.6. "Non-capital
costs" means those operating costs incurred that relate directly to
the current calendar year's operations in the contract area, excluding
exploration costs and capital costs. Non-capital costs include, but
are not limited to the following:
(a) costs of labor, materials and services used in day to day well
operations, field production facilities operations, secondary recovery
operations, storage handling, transportation and delivery operations,
gas processing auxiliaries and utilities, and other operating
activities, including repairs and maintenance;
(b) costs of office, services and general administration directly related
to the petroleum operations carried out in the contract area including
technical and related services, office supplies, office rentals and
other rentals of services and property, and personnel expenses;
(c) costs of production drilling in the contract area including labor,
materials and services used in drilling wells with the object of
penetrating a proven reservoir such as the drilling of delineation
wells as well as redrilling, deepening or recompleting wells;
(d) costs of feasibility studies and environmental impact assessments
directly related to petroleum operations in the contract area;
(e) application fees, contract service fees, and registration fees
directly related to petroleum operations in the contract area;
(f) premiums paid for insurance normally required to be carried for the
petroleum operations carried out by the contract operator under this
contract;
(g) closing down costs, being those expenditures incurred at the end of
the production life of a petroleum pool in the contract area which
could include the costs of:
(i) removal of all production facilities including the removal of
platforms and associated facilities;
(ii) environmental restoration including any feasibility studies; and
(h) costs of purchased geological and geophysical information. CAPITAL
COSTS 6.7. "Capital costs" means expenditure made for items directly
related to petroleum operations in the contract area and which
normally have a useful life of more than one (1) year. Capital costs
include but are not limited to the following:
(a) costs of construction utilities and auxiliaries, workshops, power and
water facilities, warehouses, site offices, access and communication
facilities;
(b) costs of production facilities including offshore platforms (including
the costs of labor, fuel hauling and supplies for both the offsite
fabrication and onsite installation of platforms, and other
construction costs in erecting platforms), wellhead production tubing,
sucker rods, surface pumps, flow lines, gathering equipment, delivery
lines, storage facilities, all other equipment, facilities and modules
on platforms, oil jetties and anchorages, treating plants and
equipment, secondary recovery systems, gas plants and steam systems;
(c) costs of pipelines and other facilities for the transporting of
petroleum produced in the contract area to the point of tanker
loading;
(d) costs of movable assets and subsurface drilling and production tools,
equipment and instruments, and miscellaneous equipment used for
production in the contract area;
(e) costs of floating craft, automotive equipment, furniture and office
equipment; and
(f) if approved by the Joint Authority, costs of employee and welfare
housing, recreational, educational, health and meals facilities, and
other similar costs necessary for petroleum operations in Area A.
MISCELLANEOUS RECEIPTS 6.8. "Miscellaneous receipt" means the value of
property defined in paragraph (c) below and all monies received by the
contractor, other than for the disposal of petroleum produced from the
contract area, which are directly related to the conduct of petroleum
operations in the contract area. Miscellaneous receipts include, but
are not limited to, the following:
(a) any amounts received from the sale or disposal of petroleum produced
from production testing operations undertaken in exploration and
appraisal wells;
(b) any amounts received for the disposal, loss, or destruction of
property the cost of which is an operating cost;
(c) the value of property, the cost of which is an operating cost, when
that property ceases to be used in petroleum operations in the
contract area;
(d) any amounts received by the contract operator under an insurance
policy, the premiums of which are operating costs, in respect of
damage to or loss of property;
(e) any amounts received as insurance, compensation or indemnity in
respect of petroleum production lost or destroyed prior to the point
of tanker loading;
(f) any amounts received from the hiring or leasing of property, the cost
of which is an operating cost;
(g) any amounts received from supplying information obtained from surveys,
appraisals, or studies the cost of which is an operating cost;
(h) any amounts received as charges for the use of employee amenities, the
cost of which is an operating cost; and
(i) any amounts received in respect of expenditures which are operating
costs, by way of indemnity or compensation for the incurring of the
expenditure, refund of the expenditure, or rebate, discount or
commission in respect of the expenditure. INELIGIBLE COSTS 6.9. The
following expenditures are not eligible as operating costs:
(a) payments of principal or interest on a loan or other borrowing costs
unless approved by the Joint Authority under paragraph (c) of
subsection 10 of this Section;
(b) payments of interest components of credit-purchase payments;
(c) payments of dividends or the cost of issuing shares;
(d) repayments of equity capital;
(e) payments of private override royalties;
(f) payments associated with a farm-in agreement;
(g) payments of taxes under the taxation law of either Contracting State
made in accordance with Article 29 of the Treaty;
(h) payments of administrative accounting costs, and other costs
indirectly associated with petroleum operations in the contract area;
(i) costs incurred once petroleum production has passed the point of
tanker loading;
(j) costs incurred as a result of non-compliance by the contract operator
with the provisions of this contract, the Petroleum Mining Code or the
regulations and directions issued under the Petroleum Mining Code; and
(k) Unless otherwise approved by the Joint Authority, costs incurred by
contractors other than the contract operator. ACCOUNTING METHODS TO BE
USED TO CALCULATE RECOVERY OF OPERATING COSTS 6.10. The following
methods shall be used to calculate the recovery of operating costs.
(a) Depreciation Depreciation shall be calculated beginning in the
calendar year in which the asset to be depreciated is placed into
service. A full year's depreciation shall be allowed in that calendar
year. In each calendar year the allowable recovery of capital cost
depreciation shall be twenty (20) per cent of the individual asset's
initial capital cost (calculated using the straight line method of
depreciation).
(b) Allocation of overhead costs General and administration costs, such as
those listed in paragraph (b) of subsection 6 of this Section, but
other than direct charges, allocable to petroleum operations in the
contract area shall be determined by a detailed study, and the method
determined by such a study shall be applied each year consistently.
The method determined shall require agreement of the Joint Authority
and the contractor.
(c) Interest Recovery Interest on loans obtained by a contractor at rates
not exceeding prevailing commercial interest rates on loans for
capital investments in development of petroleum pools may be
recoverable as an operating cost provided the Joint Authority has
given its approval. The Joint Authority may give its approval if it is
satisfied that recovery of interest is necessary to ensure the
financial viability of the project.
(d) Gas Costs The following procedures shall be used to allocate operating
costs related to natural gas production.
(i) Operating costs directly related to the production of natural gas
shall be directly chargeable against natural gas revenues in
determining the entitlements of the Joint Authority and the contractor
under Section 7.
(ii) Operating costs incurred for the production of both natural gas and
crude oil shall be allocated to natural gas and crude oil revenues
based on the relative value of the products produced for the current
calendar year. Common support costs shall be allocated on an equitable
basis agreed to by both Parties.
(iii) If after commencement of production, the natural gas revenues do not
permit full recovery of natural gas costs, as outlined above, then the
excess costs shall be recovered from crude oil revenues. Likewise, if
there are excess crude oil costs (crude oil costs less crude oil
revenues), this excess shall be recovered from natural gas revenues.
(iv) If production of either natural gas or crude oil has commenced while
the other has not, the allocable production costs and common support
costs shall be allocated on an equitable basis agreed to by both
Parties. Propane and butane fractions extracted from natural gas but
not spiked in crude oil shall be deemed as natural gas for the purpose
of accounting.
(e) Inventory Accounting Inventory levels shall be based on normal good
oilfield practice. The value of inventory items used outside the
contract area or sold, the cost of which has been recovered as an
operating cost, shall be treated as miscellaneous receipts in
accordance with subsection 8 of this Section. The costs of items
purchased for inventory shall be recoverable as operating costs at
such time as the items are landed in Area A.
(f) Insurance and Claims Operating costs shall include premiums paid for
insurance normally required to be carried for the petroleum operations
relating to the contractor's obligations conducted under the contract,
together with all expenditures incurred and paid in settlement of any
and all losses, claims, damages, judgments and other expenses,
including fees relating to the contractor's obligations under the
contract.
(g) Apportioning of Costs and Miscellaneous Receipts Where property, or
any other thing, for which an operating cost is allowable or a
miscellaneous receipt is assessable, is only used partially in
conducting petroleum operations in the contract area, only that
proportion of the cost or the receipt which relates to the conduct of
petroleum operations in the contract area shall be allowed as an
operating cost or assessed as a miscellaneous receipt.
SECTION 7
RECOVERY OF OPERATING COSTS AND SHARING
OF PETROLEUM PRODUCTION 7.1. The contractor is authorized by the
Joint Authority and obliged to market all petroleum produced and saved from
the contract area subject to the following provisions. 7.2. Subject to
subsections 9 and 10 of this Section, to recover operating costs, the contract
operator shall be entitled to a quantity of petroleum production, which is
produced and saved hereunder and not used in petroleum operations, equal in
value to those costs. If in any calendar year, the operating costs exceed the
value of petroleum produced and saved hereunder and not used in petroleum
operations, then the unrecovered excess of operating costs shall be carried
forward and recovered in succeeding years. 7.3. In each calendar year in which
petroleum is produced from the contract area, if the investment credit and
operating costs recoverable under subsections 10 and 2 of this Section
respectively are less than the value of the quantity of petroleum produced
from the contract area, then of the petroleum production remaining after
deducting the quantity of petroleum production equal in value to the
investment credit and operating costs, the Parties shall be entitled to take
and receive the following:
(a) the Joint Authority fifty (50) per cent and the contractor fifty (50)
per cent for the tranche of 0 to 50,000 barrels daily average of all
crude oil production from the contract area for the calendar year;
(b) the Joint Authority sixty (60) per cent and the contractor forty (40)
per cent for the tranche of 50,001 to 150,000 barrels daily average of
all crude oil production from the contract area for the calendar year;
and
(c) the Joint Authority seventy (70) per cent and the contractor thirty
(30) per cent for the tranche of more than 150,000 barrels daily
average of all crude oil production from the contract area for the
calendar year. 7.4. The method of recovering investment credits and
operating costs before the entitlements are taken by each Party as
provided under subsection 3 of this Section shall be subject to the
following proration method. For each calendar year, the recoverable
investment credits and operating costs shall be apportioned for
deduction from the production of each of the tranches defined in
subsection 3 of this Section using the same ratios as the production
from each such tranche over the total production of that calendar
year. 7.5. Of the amount of natural gas, including propane and butane
fractions extracted from natural gas but not spiked in crude oil,
remaining after recovering investment credits and operating costs
associated with natural gas operations, the Joint Authority shall be
entitled to take and receive fifty (50) per cent and the contractor
shall be entitled to take and receive fifty (50) per cent. 7.6. Title
to the contractor's share of petroleum production under subsections 3,
5 and 9 of this Section as well as to the shares of petroleum
production exported and sold to recover investment credits and
operating costs under subsections 10 and 2 of this Section
respectively shall pass to the contractor at the point of tanker
loading. 7.7. The contractor shall use its best reasonable efforts to
market petroleum production to the extent markets are available. 7.8.
Any natural gas produced from the contract area and not used in
petroleum operations hereunder may be flared if the processing and
utilization of the natural gas is not considered by the Parties to be
economic. Such flaring shall be permitted to the extent that gas is
not required to enable the maximum economic recovery of petroleum by
secondary recovery operations, including repressuring and recycling.
7.9. Notwithstanding the other provisions of this Section, in the
initial five (5) calendar years of production from the contract area,
the Parties shall be entitled to take and receive a quantity of
petroleum equal to ten (10) per cent of the petroleum production in
those years, called the "first tranche petroleum", before any recovery
of investment credits and operating costs. In each subsequent calendar
year, the first tranche petroleum shall be equal to twenty (20) per
cent of the petroleum produced in that year. The quantity of first
tranche petroleum from crude oil production for each calendar year
shall be shared between the Joint Authority and the contractor in
accordance with the sharing percentages as provided under subsection 3
of this Section, by apportioning it as applicable to the respective
production tranches as therein defined, using the same ratios as the
production from each such tranche over the total production of that
calendar year. The quantity of first tranche petroleum from natural
gas production for each calendar year shall be shared between the
Joint Authority and the contractor in accordance with the sharing
percentages as provided under subsection 5 of this Section. 7.10.
Investment credits for exploration and capital costs defined in
subsection 5 of Section 6 and paragraphs (b), (c) and (d) of
subsection 7 of Section 6 shall be allowed to the contract operator,
and, in each calendar year, shall be recoverable by the contract
operator after the sharing of the first tranche petroleum but before
the recovery of operating costs. The contract operator shall recover
the investment credits, as a quantity of petroleum production equal in
value to one hundred and twenty seven (127) per cent of such
exploration and capital costs incurred. Investment credits not
recovered in the calendar year in which the exploration and capital
costs were incurred may be carried forward and recovered in subsequent
years. 7.11. Notwithstanding the provisions of subsection 1 of this
Section which oblige the contractor to market all petroleum produced
from the contract area, the Joint Authority may market any or all
petroleum when the Joint Authority secures a net realized price for
the petroleum, f.o.b. the contract area, which is greater than the
price which can be realized by the contractor. The Joint Authority's
right to market any or all of the petroleum shall continue for such
period as it can secure a net realized price, f.o.b. the contract
area, greater than that which can be realized by the contractor. The
contract operator shall coordinate the efficient lifting of the
petroleum production, including tanker nomination and scheduling.
SECTION 8
VALUATION OF PETROLEUM PRODUCTION 8.1. Petroleum production sold to third
parties shall be valued as follows:
(a) all petroleum production to which the contractor is entitled under
this contract and which is sold to third parties, shall be valued at
the net realized price, f.o.b. the contract area;
(b) all petroleum production to which the Joint Authority is entitled
under this contract which is sold to third parties shall be valued at
the net realized price, f.o.b. the contract area; and
(c) where a contract of sale involves other than a net realized price
f.o.b., the Joint Authority shall determine a fair and reasonable net
f.o.b. price for the purposes of that sale. 8.2. Petroleum production
sold to other than third parties shall be valued by the
Joint Authority as follows:
(a) by using the weighted average per unit price, adjusted as necessary
for quality, quantity, grade and specific gravity of the petroleum
production, received by the contractor and the Joint Authority from
sales to third parties during the three (3) months preceding such
sale, excluding commissions and brokerages incurred in relation to
such third party sales; and
(b) if there are no third party sales as defined in paragraph (a), at
prevailing market prices, adjusted to take account of quality,
quantity, grade and specific gravity of the petroleum production and
taking into consideration any special circumstances with respect to
sales of such petroleum production. 8.3. For the purpose of this
Section, "third party sales" means sales by the contractor to
independent purchasers with whom, at the time the sale is made, the
contractor has no direct or indirect contractual relationship or joint
interest. 8.4. Commissions or brokerages incurred in connection with
sales to third parties, if any, shall not exceed the customary and
prevailing rate. 8.5. During any calendar year in which petroleum is
produced from the contract area, the contractor shall be liable to
make provisional payments to the Joint Authority, equal to the
estimated value of petroleum to which the Joint Authority is entitled
under Section 7 of this contract. The provisional payments shall be
made on a monthly basis unless the Joint Authority and the contractor
agree on alternate arrangements. The amount of each provisional
payment shall be calculated by the contractor using the estimates of
operating costs contained in the work program and budget of operating
costs, and the contractor's estimate of the value of quantities of
petroleum sold. During the calendar year the provisional payments may
be adjusted having regard to actual operating costs and the actual
value of sales of petroleum. Within thirty (30) days after the end of
the calendar year, adjustments and cash settlements between the Joint
Authority and the contractor shall be made on the basis of the actual
amounts of the operating costs and actual value of sales of petroleum
made during the calendar year, in order to comply with Section 7.
Similarly, where the Joint Authority markets petroleum production
pursuant to subsection 11 of Section 7, the Joint Authority shall be
liable to make provisional payments to the contractor in a manner
consistent with this subsection. 8.6. Petroleum production disposed of
other than by sale or destruction shall be valued using the method
defined in subsection 2 of this Section. 8.7. The contractor shall
notify the Joint Authority of quantities and sales prices of all
petroleum production sold or disposed of before the sales or disposals
are made.
SECTION 9
PAYMENTS 9.1. The contract operator shall make all payments to the
Joint Authority for which it is liable under this contract in United States
dollars or some other currency agreed between the contract operator and the
Joint Authority. Payments shall be made to a bank designated by the Joint
Authority. Where a payment is made in currency other than United States
dollars, the exchange rate used to convert the United States dollars liability
into that currency shall be the exchange rate set down on the day of payment
by a bank designated by the Joint Authority. 9.2. The Joint Authority shall
make all payments to the contract operator in United States dollars or some
other currency agreed between the contract operator and the Joint Authority.
Where a payment is made in currency other than United States dollars, the
exchange rate used to convert the United States dollar liability into that
currency shall be the exchange rate set down on the day of payment by a bank
designated by the Joint Authority. 9.3. Any payments required to be made
pursuant to this contract shall be made within ten (10) days following the end
of the month in which the obligation to make such payments is incurred.
SECTION 10
TENDERS FOR PETROLEUM OPERATIONS 10.1. The contract operator shall draw
invitations to tender for sub-contracts to the attention of Australian and
Indonesian sub-contractors. 10.2. Subject to subsection 4 of this Section, all
tenders for petroleum operations called by the contract operator shall be
subject to approval by the Joint Authority. 10.3. The Joint Authority shall
provide its approval or non-approval within thirty (30) days of receipt of the
tender details from the contract operator. The tender details to be provided
by the contract operator shall include a summary of the tenders received
compared against the tender criteria determined by the contract operator and
the reasons for the selection of the preferred tender. 10.4. Notwithstanding
subsection 2 of this Section, the contract operator may enter into
sub-contracts without the approval of the Joint Authority where:
(a) the tender for petroleum operations is expected to involve expenditure
of less than US$ two million (2,000,000);
(b) the tender for petroleum operations is expected to involve expenditure
of less than US$ ten million (10,000,000) and those operations form
part of a project for the development of petroleum resources, the cost
of which is expected to exceed US$ one hundred million (100,000,000);
or
(c) the tender selected by the contract operator is the lowest cost tender
and has been submitted by an Australian or Indonesian corporation.
10.5. The contract operator shall provide the Joint Athority, for
information, with the full financial details of the sub-contract,
irrespective of the amount of the expenditure involved.
SECTION 11
TITLE TO EQUIPMENT 11.1. Equipment purchased by the contract operator pursuant
to the work program and budget of operating costs remains the property of the
contractor and shall be used in petroleum operations.
SECTION 12
CONSULTATION AND ARBITRATION 12.1. Periodically, the Joint Authority and the
contract operator shall meet to discuss the conduct of petroleum operations
under this contract and shall make every effort to settle amicably any
problems arising therefrom. 12.2. Disputes, if any, arising between the Joint
Authority and contractor relating to this contract or the interpretation and
performance of this contract which cannot be settled amicably shall be
submitted to arbitration. 12.3. Except as may be otherwise agreed by the
Parties, arbitration shall be conducted in accordance with the Rules of
Arbitration of the International Chamber of Commerce. 12.4. The
Joint Authority on the one hand and the contractor on the other hand shall
each appoint one arbitrator and so advise the other Party, and these two
arbitrators shall appoint a third. If either Party fails to appoint an
arbitrator within thirty (30) days after receipt of a written request to do
so, such arbitrator shall, at the request of the other Party, if the Parties
do not otherwise agree, be appointed by the President of the International
Chamber of Commerce. If the first two arbitrators appointed as aforesaid fail
to agree on a third within thirty (30) days following the appointment of the
second arbitrator, the third arbitrator shall, if the Parties do not otherwise
agree, be appointed, at the request of either Party, by the President of the
International Chamber of Commerce. If an arbitrator fails or is unable to act,
that arbitrator's successor shall be appointed in the same manner as the
arbitrator who is replaced. 12.5. The decision of a majority of the
arbitrators shall be final and binding upon the Parties and an award may be
enforced in any court having jurisdiction for that purpose. In accordance with
paragraph 2 of Article 11 of the Treaty, in the event that the Joint Authority
cannot meet an obligation under an arbitral award arising from a dispute under
this contract, the Contracting States shall contribute the necessary funds in
equal shares to enable the Joint Authority to meet that obligation.
12.6. The place of arbitration shall be (to be
agreed by the Parties before the contract is signed). The
language of the arbitration shall be (to be agreed by
the Parties before the contract is signed).
SECTION 13
TERMINATION 13.1. This contract shall not be terminated during the first three
(3) years from the effective date. 13.2. Subject to subsection 1 of this
Section, this contract may be terminated at any time by agreement of the
Parties or in accordance with Article 48 of the Petroleum Mining Code.
SECTION 14
BOOKS, ACCOUNTS AND AUDITS BOOKS AND ACCOUNTS 14.1. In addition to any
requirements pursuant to paragraph (b) of subsection 4 of Section 5, the
contractor shall keep complete books and accounts recording all operating
costs as well as monies received from the sale or disposal of petroleum
production. AUDITS 14.2. The Joint Authority may require independent auditing
of the contractor's books and accounts relating to this contract for any
calendar year and may require the independent auditor to perform such auditing
procedures as are deemed appropriate by the Joint Authority. The contractor
shall forward a copy of the independent accountant's report to the
Joint Authority within sixty (60) days following the completion of the audit.
The Joint Authority reserves the right to inspect and audit the contractor's
books and accounts relating to this contract.
SECTION 15
OTHER PROVISIONS NOTICES 15.1. Any notices required or given by either Party
to the other shall be served in accordance with Article 35 of the Petroleum
Mining Code. 15.2. All notices to be served on the contract operator shall be
addressed to:
(contract operator's address) 15.3. All notices to be served on the
Joint Authority relating to matters for which the head office of the Joint
Authority is responsible shall be addressed to:
(address of the Joint Authority's head office) 15.4. All notices to be served
on the Joint Authority relating to matters for which the Technical Directorate
of the Joint Authority is responsible shall be addressed to:
(address of the Joint Authority's Technical Directorate) 15.5. Either Party
may substitute or change the above such address by giving written notice to
the other. APPLICABLE LAW 15.6. Subject to the provisions of the Treaty,
including
the Petroleum Mining Code, the law of shall apply to
this contract. SUSPENSION OF OBLIGATIONS 15.7. Any failure or delay on the
part of either Party in the performance of its obligations or duties under the
contract shall be excused to the extent that such failure or delay is
attributable to force majeure. 15.8. If exploration is delayed, curtailed or
prevented by force majeure the Joint Authority shall agree to vary the work
program and expenditure commitments or exempt the contract operator from part
or all of the work program and expenditure commitments during the period of
force majeure. 15.9. The Party whose ability to perform its obligations is so
affected by force majeure shall immediately notify the other Party in writing,
stating the cause, and both Parties shall do all that is reasonably within
their power to discharge their obligations.
SECTION 16
EFFECTIVENESS 16.1. This contract shall come into effect on the day it is
entered into by and between the Joint Authority and the contractor. 16.2. This
contract shall not be amended or modified in any respect, except by the mutual
consent in writing of the Parties. IN WITNESS WHEREOF, the Parties hereto have
executed this contract, in triplicate and in the English language, on
this day of , 19 .
THE JOINT AUTHORITY BY (CONTRACTOR) BY
APPROVED BY THE MINISTERIAL COUNCIL on this day of
, 19
BY BY
Minister of Minister for
on behalf of the GOVERNMENT on behalf of the GOVERNMENT
OF THE REPUBLIC OF OF AUSTRALIA
INDONESIA
ANNEX D
TAXATION CODE FOR THE AVOIDANCE OF DOUBLE TAXATION
IN RESPECT OF ACTIVITIES CONNECTED WITH
AREA A OF THE ZONE OF COOPERATION
Article 1
General Definitions 1. In this Taxation Code, unless the context otherwise
requires:
(a) the term "Australian tax" means tax imposed by Australia, other than
any penalty or interest, being tax to which this Taxation Code
applies;
(b) the term "company" means any body corporate or any entity which is
treated as a company or body corporate for tax purposes;
(c) the term "competent authority" means, in the case of Australia, the
Commissioner of Taxation or an authorised representative of the
Commissioner and, in the case of the Republic of Indonesia, the
Minister of Finance or an authorised representative of the Minister;
(d) the term "Indonesian tax" means tax imposed by the Republic of
Indonesia, other than any penalty or interest, being tax to which this
Taxation Code applies;
(e) the term "law of a Contracting State" means the law of that
Contracting State from time to time in force relating to the taxes to
which this Taxation Code applies;
(f) the term "person" includes an individual, a company and any other body
of persons; and
(g) the terms "tax" or "taxation" mean Australian tax or Indonesian tax,
as the context requires. 2. In the application of this Taxation Code
by a Contracting State any term not defined in this Taxation Code or
elsewhere in the Treaty shall, unless the context otherwise requires,
have the meaning which it has under the law of that Contracting State
from time to time in force relating to the taxes to which this
Taxation Code applies.
Article 2
Personal Scope
The provisions of this Taxation Code shall apply to persons who are residents
of one or both of the Contracting States as well as in respect of persons who
are not residents of either of the Contracting States, but only for taxation
purposes related directly or indirectly to:
(a) the exploration for or the exploitation of petroleum in Area A; or
(b) acts, matters, circumstances and things touching, concerning, arising
out of or connected with any such exploration or exploitation.
Article 3
Taxes Covered 1. The existing taxes to which this Taxation Code shall apply
are:
(a) in Australia:
(i) the income tax imposed under the federal law of Australia:
(ii) the fringe benefits tax imposed under the federal law of Australia;
and
(iii) the sales tax imposed under the federal law of Australia;
(b) in Indonesia:
(i) the income tax (Pajak-Penghasilan), including the tax on profits after
income tax payable by a contractor, imposed under the law of the
Republic of Indonesia, and its implementing regulations;
(ii) the value-added tax on goods and services and sales tax on luxury
goods (Pajak Pertambahan Nilai atas Barang dan Jasa dan Pajak
Penjualan atas Barang Mewah) imposed under the law of the Republic of
Indonesia, and its implementing regulations. 2. The provisions of this
Taxation Code shall also apply to any identical or substantially
similar taxes which are imposed after the date of signature of this
Treaty in addition to, or in place of, the existing taxes. The
competent authorities of the Contracting States shall notify each
other of any substantial changes which have been made in their
respective taxation laws within a reasonable period of time after such
changes.
Article 4
Business Profits 1. For the purposes of the taxation law of each Contracting
State, the business profits or losses of a person, other than an individual,
derived from, or incurred in, Area A in a year shall be reduced by fifty (50)
per cent. 2. Business profits derived from Area A in a year by an individual
who is a resident of a Contracting State shall be taxable only in that
Contracting State. 3. Business profits derived from Area A in a year by an
individual who is not a resident of either Contracting State may be taxed in
both Contracting States but subject to a rebate entitlement against the tax
payable in each Contracting State of fifty (50) per cent of the gross tax
payable on those profits in that Contracting State. 4. Business losses,
incurred in Area A in a year by an individual who is not a resident of either
Contracting State, that are eligible under the law of a Contracting State to
be carried forward for deduction against future income shall, for the purposes
of that law, be reduced by fifty (50) per cent. 5. For the purposes of
paragraphs 1 and 4 of this Article any losses brought forward from prior years
in accordance with the law of a Contracting State as a deduction from income
shall not be taken into account in determining the profit or loss for the
year. 6. For the purposes of this Article:
(a) the term "year" means:
(i) in Australia, any year of income;
(ii) in Indonesia, any taxable year; and
(b) the terms "business profits" and "business lossess" do not include
gains or losses of a capital nature to which Article 8 of this
Taxation Code applies.
Article 5
Dividends 1. Dividends which are paid by a company which is a resident of a
Contracting State wholly or partly out of profits derived from sources in Area
A, and which are beneficially owned by a resident of the other Contracting
State, may be taxed only in that other Contracting State. 2. The term
"dividends" as used in this Article means income from shares or other rights
participating in profits and not relating to debt claims, as well as other
income which is subjected to the same taxation treatment as income from shares
by the law of the Contracting State of which the company making the
distribution is a resident.
Article 6
Interest 1. Interest paid by a contractor, being interest to which a resident
of a Contracting State is beneficially entitled, may be taxed in that
Contracting State. 2. Such interest may also be taxed in the other Contracting
State, but the tax so charged shall not exceed ten (10) per cent of the gross
amount of the interest. 3. Where such interest is taxed in the other
Contracting State in accordance with paragraph 2 of this Article, that
interest shall, for the purposes of determining a foreign tax credit
entitlement under the taxation law of the Contracting State referred to in
paragraph 1 of this Article, be deemed to be income derived from sources in
the other Contracting State. 4. Interest paid by a contractor, being interest
to which a person who is not a resident of either Contracting State is
beneficially entitled, may be taxed in both Contracting States but the taxable
amount of any such interest shall be an amount equivalent to fifty (50) per
cent of the amount that would be the taxable amount but for this paragraph.
Article 7
Royalties 1. Royalties paid by a Contractor, being royalties to which a
resident of a Contracting State is beneficially entitled, may be taxed in that
Contracting State. 2. Such royalties may also be taxed in the other
Contracting State, but the tax so charged shall not exceed ten (10) per cent
of the gross amount of the royalties. 3. Where such royalties are taxed in the
other Contracting State in accordance with paragraph 2 of this Article, those
royalties shall, for the purposes of determining a foreign tax credit
entitlement under the taxation law of the Contracting State referred to in
paragraph 1 of this Article, be deemed to be income derived from sources in
the other Contracting State. 4. Royalties paid by a Contractor, being
royalties to which a person who is not a resident of either Contracting State
is beneficially entitled, may be taxed in both Contracting States but the
taxable amount of any such royalties shall be an amount equivalent to fifty
(50) per cent of the amount that would be the taxable amount but for this
paragraph.
Article 8
Alienation of Property 1. Where a gain or loss of a capital nature accrues to
or is incurred by an individual who is a resident of a Contracting State, from
the alienation of property situated in Area A or shares or comparable
interests in a company, the assets of which consist wholly or principally of
property situated in Area A, the amount of the gain or loss shall be taxable,
or otherwise recognised for taxation purposes, only in that Contracting State.
2. Where a gain or loss of a capital nature accrues to or is incurred by a
person, other than an individual who is a resident of a Contracting State,
from the alienation of property situated in Area A or shares or comparable
interests in a company, the assets of which consist wholly or principally of
property situated in Area A, the amount of the gain or loss shall, for the
purposes of the law of a Contracting State, be an amount equivalent to fifty
(50) per cent of the amount that would be the gain or loss but for this
paragraph.
Article 9
Independent Personal Services 1. Income derived by an individual who is a
resident of a Contracting State in respect of professional services, or other
independent activities of a similar character, performed in Area A shall be
taxable only in that Contracting State. 2. Income derived by an individual who
is not a resident of either Contracting State in respect of professional
services, or other independent activities of a similar character, performed in
Area A may be taxed in both Contracting States but subject to a rebate
entitlement against the tax payable in each Contracting State of fifty (50)
per cent of the gross tax payable in that Contracting State on the income
referred to in this paragraph.
Article 10
Dependent Personal Services 1. Salaries, wages and other similar remuneration
derived by an individual who is a resident of a Contracting State in respect
of employment exercised in Area A shall be taxable only in that Contracting
State. 2. Remuneration derived by an individual who is not a resident of
either Contracting State in respect of employment exercised in Area A may be
taxed in both Contracting States but subject to a rebate entitlement against
the tax payable in each Contracting State of fifty (50) per cent of the gross
tax payable in that Contracting State on the income referred to in this
paragraph.
Article 11
Other Income 1. Items of income of a resident of a Contracting State, derived
from sources in Area A, not dealt with in the foregoing Articles of this
Taxation Code shall be taxable only in that Contracting State. 2. Items of
income of a person who is not a resident of either Contracting State, derived
from sources in Area A and not dealt with in the foregoing Articles of this
Taxation Code may be taxed in both Contracting States but subject to a rebate
entitlement against the tax payable in each Contracting State of fifty (50)
per cent of the gross tax payable in that Contracting State on the income
referred to in this paragraph.
Article 12
Fringe Benefits
For the purposes of the taxation law of Australia, the taxable value of any
fringe benefits provided in a year of tax to employees, who are not residents
of either Contracting State, in a year of tax in repsect of employment
exercised in Area A shall be reduced by fifty (50) per cent.
Article 13
Goods Imported into Area A
Goods imported into Area A from a place other than either Contracting State
shall not be taxable in either Contracting State unless and until such goods
are permanently transferred to another part of a Contracting State in which
case the goods may be taxed only in the Contracting State last referred to.
Article 14
Mutual Agreement Procedure 1. Where a person considers that the actions of the
competent authority of one or both of the Contracting States result or will
result for the person in taxation not in accordance with the provisions of
this Taxation Code, the person may, irrespective of the remedies provided by
the domestic law of the Contracting States, present a case to the competent
authority of the Contracting State of which the person is a resident, or to
either competent authority in the case of persons who are not residents of
either Contracting State. The case must be presented within three (3) years
from the first notification of the action resulting in taxation not in
accordance with the provisions of this Taxation Code. 2. The competent
authority shall endeavour, if the claim appears to it to be justified and if
it is not itself able to arrive at a satisfactory solution, to resolve the
case by agreement with the competent authority of the other Contracting State,
with a view to the avoidance of taxation which is not in accordance with the
provisions of this Taxation Code. Any agreement reached shall be implemented
notwithstanding any time limits in the domestic law of the Contracting States.
3. The competent authorities of the Contracting States may communicate with
each other directly for the purpose of giving effect to the provisions of this
Taxation Code.
Article 15
Exchange of Information 1. The competent authorities of the Contracting States
shall exchange such information as is necessary for carrying out the
provisions of this Taxation Code or of the domestic law of the Contracting
States concerning taxes covered by this Taxation Code, insofar as the taxation
hereunder is not contrary to this Taxation Code, in particular for the
prevention of avoidance or evasion of such taxes. Any information received by
the competent authority of a Contracting State shall be treated as secret in
the same manner as information obtained under the domestic law of that
Contracting State and shall be disclosed only to persons or authorities
(including courts and administrative bodies) involved in the assessment or
collection of, the enforcement or prosecution in respect of, or the
determination of appeals in relation to, the taxes covered by this Taxation
Code and shall be used only for such purposes. 2. In no case shall the
provisions of paragraph 1 of this Article be construed so as to impose on the
competent authority of a Contracting State the obligation:
(a) to carry out administrative measures at variance with the law or the
administrative practice of that or of the other Contracting State;
(b) to supply information which is not obtainable under the law or in the
normal course of the administration of that or of the other
Contracting State; or
(c) to supply information which would disclose any trade, business,
industrial, commercial or professional secret or trade process, or
information the disclosure of which would be contrary to public
policy.
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